The Texas Property Tax Replacement Plan - Constitutional Amendment
The Texas Property Tax Replacement Plan — The Constitutional Amendment, Explained
The TPTRP does not simply swap one tax for another and trust elected officials to behave. It establishes a layered constitutional framework that controls exactly what happens to every dollar collected above what government actually needs — mandating how surplus flows, setting hard constitutional rate limits, returning what is left over directly to you, and giving you the first right to purchase the bonds your taxes back.
- Part 1 — The Foundation: Transaction Definitions, the Tax Base, and the Constitutional Protection of Citizens
- Part 2 — The Single Tax: Prohibited Forms of Taxation and the Circumvention Lock
- Part 3 — The Rate Architecture: Your Constitutional Shield
- Part 4 — Rate Governance: Voter Approval to Go Up, Legislative Freedom to Go Down
- Part 5 — Fiscal Discipline: Budgeting Within Revenue, the Budget Cap, and Government Accountability
- Part 6 — The Bond Rate: Set by Law, Automatic, and Self-Eliminating
- Part 6B — School Finance: Every District Funds Itself, and Nobody Gets Recaptured
- Part 7 — The Transition Board, Transition Fund, and Transition Plan
- Part 8 — The Fund System and Surplus Waterfall
- Part 8B — Special Districts and the Waterfall
- Part 9 — Government as Your Enterprise: Performance, Accountability, and Dividends
- Part 10 — Your Right to Enforce These Protections
- Part 11 — What Else the Amendment Changes: Conforming Amendments and Repeals
- Part 12 — How and When It Takes Effect: The Ballot, the Calendar, and the Transition
- Conclusion — Why This Changes Everything for Texas Families and Businesses
- Appendix — What Is Genuinely Original About This Plan
- References
The Foundation: Transaction Definitions, the Tax Base, and the Constitutional Protection of Citizens
HJR Sections 1.01, 1.06, 1.07, and 1.08 → Article VIII, Section 1, 1-p, 1-q, and 1-r.
Implements Article VIII, Section 1 (Taxable Transaction and Agent Transaction), Section 1-p (remote and foreign scope, rate and obligation uniformity, origin sourcing), Section 1-q (economic nexus and market access), and the Cost of Living Standard and Texas Living Exemption Set.
Why Definitions Come First
Most tax systems bury their definitions in technical appendices. The TPTRP puts them in the constitution — because the definitions are the protection. The tax base, the exemptions, and the prohibition on special-interest carve-outs are not policy preferences that can be undone by a future legislature. They are constitutional facts. A lobbyist cannot change a constitutional fact. A campaign donor cannot change a constitutional fact. Only the citizens of Texas, voting in a statewide constitutional amendment election, can change what is taxable and what is not.
This is the foundational protection that every other feature of the plan rests on. Before there is a rate, before there is a surplus, before there is a Citizen Dividend — there is a precisely defined tax base, locked in the Texas Constitution, that tells every taxing entity in the state exactly what it may tax, what it may exempt, and — critically — what it may never exempt regardless of political pressure.
The constitutional amendment to Article VIII establishes four governing provisions that together define the complete scope of the TPTRP sales and use tax: the Taxable Transaction definition, the Agent Transaction definition, the Cost of Living Standard, and the Texas Living Exemption Set. The first two define what the tax applies to. The third defines what may — and what may never — be exempted. The fourth enacts the exemptions the Legislature has determined meet that standard.
Definition 1 — A Taxable Transaction
The first constitutional provision establishes the scope of what is taxable:
A transaction is taxable under the Texas Property Tax Replacement Plan when a clear product is being purchased or a service is being rendered as part of the exchange or sale.
This definition is intentionally broad. It captures every category of commercial exchange — business-to-business, wholesale, intermediate, consumer, government procurement, and platform transactions. There are no resale certificates. There are no manufacturing-input exemptions. There are no agricultural exemptions. There are no NAICS-code carve-outs for any industry or profession. Any time something is being bought or a service is being rendered — between any two parties, at any point in the supply chain — that transaction is in the TPTRP base.
This is what makes the TPTRP's Final Taxable Base of $7.128 trillion possible. The current Texas sales tax reaches only 23.1% of the state's economic activity — not because the rest is untaxable, but because six decades of special-interest lobbying have carved most of it out through exemptions and definitional exclusions. Definition 1 restores the full transaction universe to the base.
| Transaction Category | Current TX Sales Tax | TPTRP Definition 1 |
|---|---|---|
| Business-to-business purchases | Largely exempt (resale certs) | Taxable |
| Wholesale and intermediate transactions | Exempt | Taxable |
| Insurance premiums (commercial) | Exempt | Taxable |
| Banking and financial service fees | Exempt | Taxable |
| Oil & gas wellhead transactions | Separate tax regime | Taxable |
| Commercial real estate | Outside sales tax | Taxable |
| Digital/SaaS services | Partially taxable | Taxable |
| All consumer retail purchases | Taxable | Taxable |
Definition 2 — An Agent Transaction
The second constitutional provision prevents double taxation across the supply chain — without creating any certificate, exemption, or loophole:
An Agent Transaction is any transaction performed by an agent — a person or business acting on behalf of a principal — where the agent purchases a product or service on the principal's behalf, and separately renders their own labor or provides their own product to the principal. Products or services purchased by the agent on behalf of the principal are taxed at the point of purchase. That tax cost is passed through to the principal in the final bill — it is not taxed again. The agent's own labor or product rendered to the principal is a separate taxable transaction.
Example: Contractor and Lumber
A contractor buys lumber to build a client's addition. Under TPTRP:
- The lumber purchase is taxed once — at the lumberyard, when the contractor buys it.
- The contractor bills the client. The lumber cost appears in the bill as an identified pass-through reimbursement — not taxed again.
- The contractor's own labor on the project is a separate taxable transaction — taxed once, at the point of service.
The final bill contains exactly two rounds of TPTRP taxation: the lumber purchase and the labor engagement. No dollar is taxed more than once.
This is structurally superior to the resale certificate system used under the current Texas sales tax. Resale certificates require businesses to apply for, maintain, and present documentation for every purchase they intend to resell — administratively burdensome, prone to fraud, and disproportionately costly for small businesses. The TPTRP eliminates resale certificates entirely. Every purchase is taxed at the point of purchase; pass-through is handled by clear documentation in the transaction record.
The Definition Filter — What Is Constitutionally Outside the Base
After both definitions are applied, two categories of transactions are identified as outside the TPTRP's taxable scope. These are not exemptions — they are definitional exclusions: transactions that do not meet Definition 1 or are constitutionally beyond Texas's taxing authority:
| Exclusion Category | Amount Removed | Basis |
|---|---|---|
| Federal government transactions | ~$264.0B | Supremacy Clause — constitutionally beyond Texas taxing authority |
| Financial flows failing Definition 1 (F-series: mortgage P&I, interest income, dividends, insurance claim payouts, equity/bond purchases, intra-family transfers, grants) | ~$519.0B | No product purchased or service rendered — fails Definition 1 |
One line in that table has been a recurring source of confusion, so the amendment settles it in the text. An insurance claim payout is excluded — nothing is purchased when an insurer pays a covered loss; money is simply distributed. An insurance premium is the opposite: it is the price paid for a product, and it is taxable.
"A premium paid for a policy of insurance is not a financial flow under this paragraph. The purchase of a policy of insurance is the purchase of a product and is a taxable transaction... and an exemption for a policy of personal insurance may be granted only under Section 1-r of this article."
Commercial insurance is taxed like every other business purchase. Personal life, health, and property insurance is intended for exemption under the Texas Living Exemption Set — but that decision belongs to the Legislature under the Cost of Living Standard, not to the constitution.
| Total Definition Filter | ~$783.0B | Definitional, not political |
|---|
After the Definition Filter, the Stage 2 Relevant Tax Base is $7.993 trillion. After the twelve TLES categories are removed (see below), the Final Taxable Base is $7.128 trillion.
The Reach Provision — Closing the Out-of-State and Foreign Seller Gap
Definition 1 establishes what is taxable. But a tax base is only as strong as its reach — and historically, the biggest hole in any Texas sales tax has not been what is defined as taxable, but who can be required to collect it. For decades, any seller located outside Texas's borders — whether in another state or in another country — could sell millions of dollars of goods and services to Texas businesses and consumers and owe nothing, simply by keeping its employees and servers off Texas soil.
The TPTRP closes that hole permanently, in the constitution.
Two additional constitutional provisions — Article VIII, Section 1-p and Article VIII, Section 1-q — work together to ensure that every commercial transaction consumed in Texas is in the TPTRP base, regardless of where the seller is located. Together they answer two questions: What constitutes a taxable transaction when the seller is remote? and What must a seller do before it can legally access the Texas market?
Where the Transaction Occurs — The Destination Principle
The TPTRP is built on destination-based taxation: a transaction is subject to Texas tax based on where the buyer is located and where the economic benefit of the transaction is received — not where the seller is located. If a Texas business hires an IT consulting firm in India, that is a Texas transaction. If a Texas consumer purchases a software subscription from a company in Delaware, that is a Texas transaction. If a Texas manufacturer pays a New York accounting firm, that is a Texas transaction.
This is not a novel theory. The U.S. Supreme Court confirmed in South Dakota v. Wayfair, Inc. (2018) that states may require remote sellers to collect and remit sales tax based solely on economic presence in the state. Texas implemented economic nexus rules in 2019. The TPTRP embeds this standard in the constitution itself — raising the floor so that no future Legislature can weaken it, and lowering the economic nexus threshold from the current $500,000 to $100,000 to capture the full range of meaningful commercial relationships with Texas customers.
"The location of the buyer, or the location where the economic benefit of the transaction is received, governs whether a transaction is subject to the sales and use tax of this state. A transaction in which the buyer is located outside this state is not a transaction subject to the sales and use tax, regardless of where the seller is located."
One Rate, No Exceptions for Origin
The TPTRP's rate uniformity clause — also in Section 1-p — closes a companion loophole: the temptation to charge foreign sellers a different rate than Texas-based sellers, or to give politically favored out-of-state sellers a lower obligation. The constitution prohibits both.
No seller may be charged a higher or lower TPTRP rate, or subjected to more or less burdensome compliance obligations, based solely on where it is domiciled. A software firm in Austin, a software firm in Seattle, and a software firm in Bangalore are all subject to the identical rate on identical transactions with Texas customers. This is not only a constitutional requirement under the Commerce Clause and the Foreign Commerce Clause — it is a protection for Texas businesses, who compete directly against out-of-state and foreign vendors. A level playing field is the constitutional guarantee.
"The sales and use tax, the rate of the sales and use tax, and all obligations imposed under this section and Section 1-q of this article apply equally to all sellers, whether domiciled in this state, in another state, or in a foreign country."
Where Local Revenue Lands — Origin Sourcing for In-State Sellers
Destination sourcing answers the out-of-state and foreign seller problem. But it leaves a second question unresolved: what happens when both the buyer and the seller are in Texas? If destination sourcing applied to every transaction, the local share of the tax would follow the customer's address no matter where the actual business, its employees, and its physical footprint sit — pulling revenue away from the communities where the real economic activity, and the real infrastructure burden, actually occurs.
The TPTRP resolves this by preserving the sourcing rule Texas has applied for decades to sellers with a genuine place of business in the state: origin-based sourcing, tied to a single test — is the seller a party to the sale? A transaction is sourced to a seller's Texas location only when that seller is the one actually selling the product or rendering the service. This test governs three cases the same way, without exception for industry or business model.
A retail storefront, an office, a manufacturing plant, or a registered oil and gas wellhead is a straightforward case — the seller is unambiguously a party to the sale, so the local share is sourced to that location. A wellhead transaction sources to the county and any overlapping special districts where the well physically sits, regardless of where the midstream purchaser — a pipeline company, gathering system, or refiner — is headquartered, exactly as production-based revenue has always been allocated by county of production.
Warehouses and fulfillment centers require the same test applied carefully, because a warehouse can sit on either side of it. If a warehouse is a pure pass-through facility — goods purchased from a seller located elsewhere simply move through the building on their way to the customer, and the warehouse operator never sells anything to that customer — the warehouse is not a party to that sale. No transaction is sourced there, and the warehouse does not collect or remit tax on the value of the goods passing through. That is not a loophole; it reflects the simple fact that no Definition 1 transaction involving that inventory occurred at that address.
What the warehouse does collect tax on is any transaction where it is genuinely the seller — most commonly, a storage, handling, or fulfillment fee it charges the shipper for the use of its facility. That fee is a service rendered for consideration, a taxable transaction under Definition 1 in its own right, and it sources to the warehouse's own address under the same origin rule. This is also where the local community realizes the fiscal benefit of hosting a large distribution facility: alongside the commercial utility taxes already generated by the building's electricity and water usage, the fulfillment fee itself is now a taxable local transaction — even though the retail sale passing through the building is not.
"For a taxable transaction in which a seller with a place of business in this state — including a registered wellhead, well site, gathering facility, production facility, retail location, office, manufacturing plant, or warehouse — is a party to the sale of the product or service purchased, the transaction is sourced to that seller's place of business for purposes of distributing the local share, if any, of the sales and use tax. A facility through which goods are stored, routed, transferred, or delivered is not, by that fact alone, the seller's place of business for a transaction to which the facility's operator is not a party."
The Market Access Condition — Section 1-q
Section 1-q is where the reach provision acquires its teeth. It establishes that access to the Texas market is a privilege, not a right — and that the price of that privilege is registration and compliance.
Any out-of-state or foreign entity that reaches $100,000 in annual Texas receipts — or completes 200 or more separate Texas transactions — must, before continuing to transact with Texas customers:
- Register with the Texas Secretary of State for authorization to transact business in this state, and
- Obtain a Texas Comptroller tax permit and begin collecting and remitting the TPTRP tax.
These are not optional. They are constitutional prerequisites to market access — embedded in Article VIII so that no future Legislature can grant an exemption to any favored foreign country, trading partner, or out-of-state industry coalition.
"A seller located outside this state, whether in another state of the United States or in a foreign country, is subject to the sales and use tax of this state if the seller has substantial nexus with this state... (1) has gross revenue from taxable transactions with buyers located in this state of $100,000 or more; or (2) engages in 200 or more separate taxable transactions with buyers located in this state." The thresholds are fixed in the constitution itself. The Legislature may lower either one but may not raise either without another statewide amendment, and physical presence may not be required as a condition of nexus.
Individual Texans Are Covered on the Same Terms
The reach provision is not limited to business purchasers. Section 1-q(e-1) applies the entire section to a transaction with an individual consumer in Texas exactly as it applies to a transaction with a Texas business, and it forecloses the obvious evasion: a seller subject to Texas nexus may not decline to sell to, impose a surcharge upon, or impose a different price or condition upon a Texas buyer because it has to collect the tax.
Section 1-q(e-2) then closes the last hole. A seller below the $100,000 and 200-transaction thresholds has no collection duty — but the transaction is still taxable, and the tax is payable by the buyer. The constitution says so in terms:
"This subsection does not create or authorize an exemption; a taxable transaction not collected by the seller is taxable and payable by the buyer."
The Legislature sets the reporting mechanics and may set a de minimis threshold below which a buyer need not report. What it may not do is treat an uncollected transaction as an exempt one.
The Texas Business Firewall
Section 1-q does not rely solely on foreign sellers voluntarily complying. It authorizes the Legislature to require Texas businesses to verify vendor compliance — and prohibit transactions with unregistered vendors. A Texas business that knowingly purchases taxable services from a foreign vendor that has not registered faces civil and criminal consequences under the implementing legislation. The constitutional provision authorizes this mechanism explicitly; the companion implementing bill (H.B.) operationalizes it.
This creates a three-wall enforcement structure: (1) the foreign or out-of-state seller cannot lawfully do business in Texas without registering; (2) the Texas buyer faces direct legal liability for knowingly transacting with an unregistered vendor; and (3) a publicly searchable Comptroller registry makes registration status visible to any buyer before the transaction occurs. The old use-tax self-assessment mechanism — chronically under-enforced and largely unknown to Texas businesses — is replaced by an affirmative, constitutionally grounded compliance structure.
What This Means for the Tax Base
The current Texas sales tax reaches only 23.1% of the state's economic activity. One of the largest components of the gap is the systematic under-collection from out-of-state and foreign service providers — IT outsourcing, professional services, HR, business process services, call centers, and digital products — categories that the current system either does not tax at all or only partially taxes. The TPTRP's reach provisions, combined with Definition 1's broad-base commercial transaction scope, bring these transactions fully into the base for the first time.
Every seller that wants access to the 30 million Texans and the $2.3 trillion Texas economy must collect and remit the same tax as every Texas seller. No exceptions. No treaty shields. No domicile carve-outs. The constitution says so — and no legislature can change it without going back to the voters.
In plain language: It does not matter where you are. If you sell to Texas, you collect the Texas tax. If you want Texas customers, you register with Texas. The constitution guarantees it — for every seller, from every place, on equal terms. And the Texas businesses that have been paying this tax while their foreign competitors paid nothing will finally be on a level playing field. And within Texas, tax follows the sale — not the shelf, and not the truck: if you sell it, you collect it, and your community gets the benefit.
The Cost of Living Standard and the Texas Living Exemption Set
The third and fourth constitutional provisions work together as a matched pair. The Cost of Living Standard is the constitutional rule that defines what the Legislature may exempt and — equally important — what it may never exempt, regardless of political pressure. The Texas Living Exemption Set (TLES) is the constitutional authorization for the Legislature to act on that authority: a living schedule of transaction classes that meet the Standard, which the Legislature may add to or remove from at any time through the ordinary legislative process.
Together, these two provisions do something no Texas tax law has ever done. They put the definition of a valid exemption in the constitution itself — above the reach of any lobby, any industry coalition, or any legislative majority acting alone.
The Cost of Living Standard — The Constitutional Gate on All Exemptions
The Cost of Living Standard establishes the single test that every exemption must pass — now and in the future:
"The Legislature may exempt from the sales and use tax imposed under this article only those transaction classes that directly and primarily affect the cost of living of individual Texas citizens and their immediate families... An exemption that fails this Standard is void."
This provision operates as a constitutional gate. Any exemption the Legislature enacts must clear it. Any exemption that does not is void on its face — not voidable, not subject to a grace period, not dependent on a court ruling to take effect. It simply has no legal force.
The Standard closes the pipeline that produced over 200 special-interest carve-outs in Texas's current sales tax system. A business association cannot lobby for an industry exemption. A professional guild cannot obtain a category carve-out. A manufacturer cannot obtain an input exemption. The question the Standard asks is simple and binary: does this exemption directly and primarily affect the cost of living of individual Texas citizens and their families, applied uniformly to all of them without distinction? If not, it is void.
What the Standard also makes explicit is the prohibition that current law leaves entirely to legislative goodwill: no exemption may be granted on the basis of who the seller is, what industry a transaction belongs to, or what commercial purpose the buyer asserts. The exemption must follow the citizen — not the industry.
The Texas Living Exemption Set — The Legislature's Exercise of That Authority
The TLES is the constitutional authorization for the Legislature to build and maintain the list of exemptions that meet the Standard. It is not a fixed list carved into the constitution. It is a grant of ongoing legislative authority — bounded by the Standard — to create, expand, or narrow the exemptions as Texas families' needs evolve over time.
"The Legislature may, by general law, establish, amend, and maintain a schedule of transaction classes exempt from the sales and use tax imposed under this article, to be known as the Texas Living Exemption Set... provided that every transaction class included satisfies the Cost of Living Standard. An exemption applies only to a transaction made by a Texas citizen, or by an agent acting on behalf of a Texas citizen, for personal, primary residence, or family use." No exemption of any kind is written into the constitution. Every exemption — including residential utilities, fuel purchased at the pump for personal use, and personal insurance — is set in the TLES implementing legislation under this Standard, and the comptroller accounts for personal versus commercial use through the permit system.
The citizen standing provision is the enforcement mechanism that gives the Standard its teeth beyond the legislature itself. Because any Texas citizen may bring a challenge, the political calculus for adding a commercially motivated exemption changes fundamentally. A trade association that successfully lobbies for a carve-out faces the immediate prospect of a citizen suit — and the knowledge that a prevailing citizen will be made whole on attorneys' fees. The State bears no fee exposure when a citizen does not prevail, removing any chilling effect on good-faith challenges. The result is a self-policing system: the Standard is enforced not just by courts acting on their own initiative, but by the 30 million Texans who have a direct financial interest in keeping the exemption list clean.
In plain language: A grocery store does not get an exemption. Groceries purchased by individual families get the exemption. A pharmaceutical company does not get an exemption. Prescription drugs purchased by individual patients get the exemption. An auto insurer does not get an exemption. Personal auto insurance premiums paid by individual Texans get the exemption. The exemption follows the citizen, not the industry — and the constitution guarantees it stays that way.
Administration — Existing Permit System, Zero New Bureaucracy
The TLES is administered through the existing Texas sales tax permit system — the same permit every business in Texas already holds. The permit application includes a designated TLES certification section. Each business certifies, under oath, which of its products or services fall within a TLES-exempt category. No new agency, no new licensing structure, and no new compliance regime is required.
Enforcement operates through four independent channels: (1) Comptroller audit authority over all permit holders; (2) District Attorney and Attorney General independent authority for criminal prosecution and civil back-tax collection; (3) citizen standing for wrongful exemption claims; and (4) citizen standing for wrongful tax collection — allowing any citizen who is charged the TPTRP tax on an exempt transaction to bring a civil enforcement action and recover the wrongfully collected amount plus fees.
Administration runs through the existing sales tax permit system, with no new agency. Each permit holder certifies its claimed exemptions under oath. The comptroller has full audit authority; district attorneys and the attorney general have independent authority to prosecute fraudulent claims. Any Texas citizen has standing to sue a seller that wrongfully claims an exemption or wrongfully charges tax on an exempt transaction, and a prevailing citizen recovers the tax, interest, penalties, and attorney's fees.
The Single Tax: Prohibited Forms of Taxation and the Circumvention Lock
Implements the Article VIII prohibitions on ad valorem, franchise, revenue, profit-based, and general-revenue occupation taxation; the voter-approval requirement for any additional form of taxation at any level of government; and the anti-circumvention definition of a tax increase.
What Texas Has. What Texas Adds. What Texas Prohibits Forever.
The TPTRP does not simply replace the taxes it eliminates. It constitutionally prohibits them — and every other form of taxation that government has historically used to extract money from citizens outside the visible, voter-controlled sales tax structure. This section explains what is retained from existing Texas constitutional prohibitions, what new prohibitions are added, and how the plan closes every circumvention door that any level of government could attempt to exploit.
What Texas Already Prohibits — And What the TPTRP Retains
The Texas Constitution has, over more than a century of legislative experience with government overreach, accumulated a series of hard prohibitions on specific forms of taxation. These are not statutory rules that a future legislature can repeal. They are constitutional facts. The TPTRP retains every one of them and adds to them.
The existing prohibitions that carry forward unchanged under the TPTRP constitutional amendment include:
| Prohibited Tax | Texas Constitution | Current Status |
|---|---|---|
| State ad valorem (property) taxes | Art. VIII, Sec. 1-e | Prohibited since 1968 — TPTRP constitutionally extends this to all ad valorem taxes at every level |
| Individual income tax | Art. VIII, Sec. 24-a | Prohibited since 2019 |
| Capital gains tax on individuals | Art. VIII, Sec. 24-b | Prohibited since 2025 |
| Wealth or net worth tax | Art. VIII, Sec. 25 | Prohibited since 2023 |
| Death, estate, inheritance, and gift taxes | Art. VIII, Sec. 26 | Prohibited since 2025 |
| Transfer tax on fee-simple real property conveyances | Art. VIII, Sec. 29 | Prohibited since 2015 |
| Taxes on corporations not authorized by general law | Art. VIII, Sec. 4 | Power to tax corporations may not be surrendered by the Legislature |
| Occupation taxes not equal and uniform | Art. VIII, Sec. 2 | Must be equal and uniform on the same class |
These prohibitions represent decades of Texas voters saying: this form of taxation is off the table, permanently. The TPTRP does not disturb a single one of them.
"...any tax measured by or imposed upon a transaction, a sale, a receipt, or the purchase, use, storage, rental, occupancy, or consumption of a product or service, other than the sales and use tax established by this article, including a tax that applies to a particular product, service, commodity, industry, or class of seller and not to taxable transactions generally. A tax described by this subdivision is a second and duplicative sales tax, is not equal and uniform within the meaning of Section 1(a) of this article, and is prohibited at every level of government in this state."
What the TPTRP Adds — New Permanent Prohibitions
The TPTRP constitutional amendment adds three categories of prohibited taxation that current law either permits, does not address, or leaves open as a future option for the Legislature. These new prohibitions are among the most consequential citizen protections in the plan.
#### New Prohibition 1 — All Ad Valorem and Property-Based Taxation, at Every Level
Texas's existing constitutional prohibition (Art. VIII, Sec. 1-e) bars only state-level ad valorem taxes. Local governments — counties, cities, school districts, and special districts — may still levy ad valorem property taxes. The result is the system that currently crushes Texas homeowners: a state that cannot tax your property but whose political subdivisions can, and do, at rates that have driven average Texas property tax bills to among the highest in the nation.
The TPTRP closes this gap entirely. The constitutional amendment extends the prohibition on ad valorem and all property-based taxation to every level of government in Texas — state, county, city, school district, and special district. No taxing entity covered by this Article may impose, assess, collect, or enforce any tax, assessment, levy, or charge measured by the value of property, real or personal, owned or occupied by any person or entity.
This is the core promise of the plan. Property taxes in Texas are not reformed, capped, or reduced. They are constitutionally abolished — at every level, for every entity, permanently.
Prohibition on ad valorem and property-based taxation — Article VIII, Section 1-e and 1-m(b)(1). This prohibition is established in Section 1-m(b) quoted above, and in Section 1-e, which extends the existing Art. VIII, Sec. 1-e state-level bar to every level of Texas government.
#### New Prohibition 2 — Franchise Taxes, Revenue Taxes, and Profit-Based Taxes
Texas currently imposes a franchise tax — officially called the "margin tax" — on businesses operating in the state, calculated as a percentage of revenue or taxable margin. This is effectively a revenue and profit tax on business activity. Under the TPTRP, the franchise tax and every equivalent form of taxation measured by revenue, gross receipts, net income, profit, or business margin is abolished and constitutionally prohibited.
These forms of taxation are inherently regressive on business activity. They penalize companies for generating revenue regardless of profitability, create compliance burdens disproportionate to small and medium businesses, and duplicate the taxation that already occurs at the transaction level under the TPTRP's sales and use tax. Because every taxable transaction is already captured in the TPTRP base — including business-to-business, wholesale, and intermediate transactions that the current sales tax exempts — there is no taxation gap that a franchise or margin tax needs to fill.
Prohibition on franchise, revenue, and profit-based taxes — Article VIII, Section 1-m(b)(2) and (c)(1). This prohibition is established in Section 1-m(b) quoted above.
#### New Prohibition 3 — Occupation Taxes Functioning as General Revenue
The Texas Constitution already requires that occupation taxes be equal and uniform (Art. VIII, Sec. 2). The TPTRP adds an additional prohibition: no occupation tax, licensing fee, permit fee, or regulatory assessment may be imposed whose primary economic effect is to supplement general operating revenues rather than to fund the specific regulatory or service activity it nominally covers. Occupation taxes that are genuinely tied to the cost of regulating a specific profession or activity remain permissible. Occupation taxes that are de facto revenue instruments disguised as licensing requirements are prohibited.
The Voter Approval Rule — No New Taxes Without the People's Permission
The TPTRP sales and use tax is the only form of taxation any entity covered by this Article may impose as a matter of right. Every other form of taxation — beyond the prohibited categories above — requires explicit voter approval before it may be imposed.
This rule applies to the State of Texas in exactly the same manner as it applies to every county, city, school district, and special district. The State is not exempt. No branch of state government may impose a new tax form without going to the voters first.
"No taxing entity may impose any tax, levy, assessment, or charge of any kind, by any name or in any form, beyond the sales and use tax authorized by this article, unless the tax has been approved by a majority of the qualified voters within the affected jurisdiction voting at a lawfully conducted election... No election may authorize a tax measured by the value or ownership of property, a tax measured by income, revenue, gross receipts, margin, profit, or business activity, or a tax measured by or imposed upon a transaction or upon a particular product or service."
in
the same manner as all other taxing entities.*
What this means in practice: If the Legislature ever wished to impose a new type of tax not prohibited above — a consumption tax on a specific category, a new occupational fee structure, or any other revenue instrument — it could not do so by statute alone. It would require a statewide voter election. Cities, counties, and districts face the same requirement within their respective jurisdictions. No governing body in Texas — at any level — may add a new tax burden on citizens without first asking them.
Closing the Circumvention Loophole
History shows that governments facing hard tax limits find creative ways around them. The TPTRP anticipates every known circumvention mechanism and closes them by constitutional definition.
Governments have historically worked around rate caps and tax prohibitions by:
- Imposing mandatory fees and assessments not labeled as taxes
- Reclassifying exempt transactions as taxable to expand the base without raising the stated rate
- Creating new special-purpose entities whose functions duplicate existing services, avoiding the entity's existing rate cap
- Expanding the definition of "service fees" until they function as general operating revenue
The TPTRP closes each of these doors.
A "tax rate increase" is defined broadly in the constitutional amendment to include:
- Imposing a new mandatory fee, assessment, or levy not directly tied to a specific, voluntarily-used service
- Reclassifying a previously exempt transaction as taxable — which requires a constitutional amendment, not a governing body action
- Creating a new special-purpose entity whose purpose duplicates or supplements the primary entity's existing service functions
- Expanding the definition of a "service fee" such that it functions as a general operating revenue source
No taxing entity subject to this Article may impose, assess, collect, or enforce any mandatory monetary obligation upon persons or transactions within its jurisdiction whose primary economic effect is to supplement general revenues, unless such obligation has been approved by a majority of voters within the jurisdiction in a lawfully conducted election.
The Texas Comptroller has standing and authority to challenge any such obligation as a functional tax increase and to seek injunctive relief in Travis County district court. Any Texas citizen also has standing to bring such a challenge, with fee-shifting on prevailing.
"No taxing entity may impose, assess, collect, or enforce any mandatory monetary obligation upon persons or transactions within its jurisdiction — by any name or in any form, including a fee, assessment, surcharge, or levy — the primary economic effect of which is to supplement general revenues, unless the obligation has been approved by a majority of the qualified voters within the affected jurisdiction voting at a lawfully conducted election." Subsection (f) then defines four acts as rate increases subject to every voter-approval requirement: a new mandatory fee not tied to a voluntarily used service; reclassifying an excluded transaction as taxable, which requires a constitutional amendment; creating a new entity that duplicates an existing one; and expanding a service fee so that it functions as general revenue.
What This Looks Like Together
The table below shows what current Texas law permits, what existing constitutional prohibitions already block, and what the TPTRP adds:
| Tax or Revenue Form | Current Law | TPTRP |
|---|---|---|
| Local property (ad valorem) taxes | Permitted — counties, cities, ISDs, SDs | Constitutionally abolished at all levels |
| State ad valorem taxes | Already prohibited (Art. VIII, Sec. 1-e) | Prohibition retained and extended |
| Franchise / margin tax | Permitted — imposed statewide | Constitutionally abolished |
| Individual income tax | Already prohibited (Art. VIII, Sec. 24-a) | Prohibition retained |
| Capital gains tax on individuals | Already prohibited (Art. VIII, Sec. 24-b) | Prohibition retained |
| Wealth / net worth tax | Already prohibited (Art. VIII, Sec. 25) | Prohibition retained |
| Death / estate / inheritance tax | Already prohibited (Art. VIII, Sec. 26) | Prohibition retained |
| Transfer tax on real property | Already prohibited (Art. VIII, Sec. 29) | Prohibition retained |
| New additional taxes of any kind | Permitted by Legislature or local governing body | Voter approval required — all entities including the State |
| Mandatory fees functioning as taxes | Permitted and common | Constitutionally prohibited without voter approval |
| TPTRP sales and use tax | Not yet enacted | The single authorized revenue mechanism for all entities |
In plain language: Under the TPTRP, there is one tax. It is visible. It is on every receipt. It has a constitutional ceiling. Any increase requires your vote. Every other form of taxation that governments have used — or might someday try to use — to extract money from Texas citizens and businesses is either already prohibited by the Texas Constitution, newly prohibited by this amendment, or subject to direct voter approval before it can be imposed. There are no back doors. There are no workarounds. The constitution closes them all.
What Is Actually Abolished — The Full List
Prohibiting a form of taxation and abolishing a specific tax are two different acts, and the amendment does both. Section 1-m(c) names every tax that ends on the Implementation Date:
| # | Tax abolished | Level |
|---|---|---|
| 1 | Franchise tax and every successor measured by margin, revenue, or gross receipts | State |
| 2 | Gasoline, diesel, and other motor fuel and lubricant taxes | State |
| 3 | Oil, gas, and condensate production taxes at the wellhead, and production-measured regulatory fees | State |
| 4 | Motor vehicle sales, use, and rental taxes | State |
| 5 | Insurance premium taxes and insurer, agent, and broker gross receipts taxes | State |
| 6 | Hotel occupancy taxes | State |
| 7 | Mixed beverage, mixed beverage gross receipts, and alcoholic beverage taxes | State |
| 8 | Cigarette, cigar, and other tobacco product taxes | State |
| 9 | Utility and utility company gross receipts taxes | State |
| 10 | Coin-operated machine taxes | State |
| 11 | The local counterparts of items 2 through 10 — municipal and county hotel occupancy taxes, venue project taxes, short-term motor vehicle rental taxes, local mixed beverage and alcoholic beverage taxes, and any other local tax on a particular product, service, or class of transaction | Local |
| 12 | Any other state or local tax measured by a transaction, a sale, a receipt, or the volume or value of a product sold or produced | Both |
Each transaction formerly reached by one of those taxes becomes an ordinary taxable transaction under Section 1-p, subject to the same rate as every other transaction, unless the Legislature exempts it under the Cost of Living Standard.
Why the Local Product Taxes Fall Too
This is the part that surprises people, so it is worth stating the reasoning plainly. A hotel occupancy tax, a rental car tax, a venue tax, a beverage tax, and a tobacco tax all do the same thing: they impose on one class of transaction a burden that no other transaction bears. Layered on top of a uniform sales and use tax, each one is simply a second sales tax aimed at a single industry.
The amendment says so in the constitutional text itself, and the legislative findings say why:
"A tax imposed on a single product, service, or industry is a second sales tax and is not equal and uniform... Layering such a tax on top of a uniform sales and use tax recreates the special-interest targeting this amendment is designed to end, in the opposite direction."
The entire logic of this plan is that the base is broad because nothing is carved out, and the rate is low because the base is broad. A carve-out and a surtax are the same violation of that principle pointed in opposite directions. If the plan tolerated industry-specific surtaxes, it would have replaced a system of favored industries with a system of disfavored ones, and it would have handed every future legislature the same tool the exemption system handed them.
What survives is what was never a tax on a transaction to begin with: a license or permit fee set at the cost of the regulatory activity it funds, a metered utility charge, a benefit-based special assessment, an impact fee, and a toll. Section 1-m(b) protects each of those expressly.
The Cap Is a Ceiling, Not a Rate Schedule
The single most common misreading of a tiered structure is that the tier sets the rate. It does not. The Constitutional Cap Rate is the maximum a single entity in that tier may impose, and nothing more. Two adjacent cities may run entirely different rates. A county with a lean budget may sit far below its 1.00% cap while the county next door sits at it. After the starting rates take effect on the Implementation Date, no entity's rate has any legal relationship to any other entity's rate.
What a Texan actually pays at a given address is the tax stack — the sum of the rates of the overlapping entities whose jurisdictions include that address. The state rate, plus the county rate, plus the city rate, plus the school district rate, plus the special district share. That sum may never exceed 6.00% anywhere in Texas.
Overlapping Special Districts and the Tier 5 Aggregate Cap
Tier 5 needs one additional rule, because special districts are the only class of entity whose jurisdictions routinely overlap one another. A single address in Dallas County can sit inside a hospital district, a community college district, an emergency services district, and a municipal utility district simultaneously. If each of them could impose 0.50%, the stack at that address would reach 7.50%.
So the Tier 5 cap is written as an aggregate:
"Because the jurisdictions of special districts overlap one another, the Tier 5 Constitutional Cap Rate of one-half of one percent (0.50%) is the maximum aggregate rate that may be imposed at any location in this state by all Tier 5 entities whose jurisdictions include that location, combined."
The Transition Board apportions the available Tier 5 rate among the overlapping districts by administrative order, based on each district's certified obligations, and the Transition Monitoring Division takes over that function permanently after the Board sunsets. A district that can already fund its obligations from its own operating revenues, user charges, or other lawful sources takes no share at all — and becomes a candidate for absorption or dissolution. That is the mechanism by which the plan does what no property tax reform has ever done: it puts real, continuous pressure on the 3,000-plus special districts to consolidate, be absorbed by their county, or wind down.
Districts Created After the Change
A taxing entity created after the Implementation Date starts with nothing. Its initial rate is zero. It has no Final Year Baseline, no replacement obligation, and no eligibility for any form of state assistance. It may impose a rate only after its voters approve one, and the first rate it may put on the ballot is capped at half of its tier's Constitutional Cap Rate. Only after a full fiscal period at a voter-approved rate may it seek more, on the same terms as everyone else. A new special district cannot impose any rate at all until the Monitoring Division reapportions the Tier 5 cap to make room for it — which means an existing district has to give something up first.
Constitutional Provisions in This Part
The following constitutional provisions drafted in this section assemble into the TPTRP amendment to Article VIII of the Texas Constitution:
| # | Provision Name | What It Does |
|---|---|---|
| P-1 | Prohibited Forms of Taxation | Abolishes ad valorem taxes at all levels, franchise and margin taxes, and occupation taxes functioning as revenue — adds to existing Art. VIII prohibitions |
| P-2 | Additional Tax Forms | Requires voter approval for any new tax form not prohibited above — applies equally to the State and all political subdivisions |
| P-3 | Prohibition on Circumvention | Defines what constitutes a functional tax increase, closes fee/surcharge/entity-creation workarounds, grants Comptroller and citizen standing to challenge violations |
These three provisions join the four provisions established in Part 1 (Taxable Transaction, Agent Transaction, Cost of Living Standard, Texas Living Exemption Set) to form the first seven constitutional provisions of the TPTRP amendment.
The Rate Architecture: Your Constitutional Shield
HJR Section 1.04 → Article VIII, Section 1-n(a), (b), (b-1), and (c).
Five tiers. Two sub-rates per entity. One hard ceiling written into the constitution. Why every rate in the TPTRP system is bounded — and what the Texas Constitution already says about those who levy taxes.
Every taxing entity in Texas — the state, your county, your city, your school district, and every special district — operates within a structured, tiered rate system under the TPTRP. Each entity has two rate components that together may never exceed a per-tier Constitutional Cap Rate (CCR) written directly into the constitutional amendment. No legislative act, no executive order, and no governing body resolution may breach that ceiling. Only Texas voters, through a new constitutional amendment, may ever change it.
This is not how today's system works. Today, the legislature sets caps by statute and can change them by statute. The TPTRP takes the ceiling out of the legislature's hands entirely and plants it in the constitution — the only place where it is safe from political renegotiation.
The Five Tiers — What They Are and Where They Come From
Texas government is already organized in layers, and the Texas Constitution already defines them. The TPTRP maps its five tiers directly onto those constitutionally recognized categories of taxing entities — the same entities that levy property taxes today.
| Tier | Entity Class | Current Constitutional Authority | TPTRP Role |
|---|---|---|---|
| T1 | State of Texas | Art. VIII, Sec. 17 — Legislature may tax any subject consistent with constitutional principles | Replaces state sales tax and all other state-level taxes |
| T2 | Counties | Art. IX, Sec. 1 — Counties are legal subdivisions of the State; Art. VIII, Sec. 9 — county tax caps; Art. VIII, Sec. 1-a — county road/flood levy | Replaces county property tax levy; absorbs 1,284 local special districts |
| T3 | Cities (Municipalities) | Art. XI, Sec. 4–5 — cities of all sizes may levy taxes authorized by law or charter; Art. VIII, Sec. 9 — city tax caps | Replaces city property tax levy and city local sales tax; absorbs 2,864 local special districts |
| T4 | Independent School Districts (ISDs) | Art. VII, Sec. 3 — Legislature shall provide for assessment and collection of school district taxes; Art. VII, Sec. 3-b — bond obligations survive boundary changes | Replaces ISD M&O and I&S property tax levies, and the state Foundation School Program pass-through ($25.99B) |
| T5 | Statewide Special Districts | Art. III, Sec. 52 and Art. XVI, Sec. 59 — special purpose districts authorized by Legislature for defined purposes | Replaces multi-county/multi-city special district property tax levies (500 statewide entities) |
The current Texas Constitution permits each of these entity classes to levy taxes within legislatively set limits. Under the TPTRP constitutional amendment, the ad valorem property tax authority is revoked for every tier and replaced with a single authorized revenue mechanism — the TPTRP sales and use tax — subject to the CCR for each tier.
The current combined sales tax cap of 8.25% is set by statute and can be changed by the Legislature at any time. The TPTRP's combined CCR of 6.00% is set by the constitution. Citizens will have a lower ceiling — and one that cannot be moved without their vote.
The Two Sub-Rates: M&O and I&S
Within every taxing entity's total rate, there are exactly two sub-rate components. Understanding them is essential to understanding how the plan protects you.
The M&O Rate — Maintenance and Operations
The Maintenance and Operations (M&O) rate is the portion of an entity's total rate that funds day-to-day government operations: salaries, services, maintenance, law enforcement, administration, and everything the entity does that is not bond debt repayment. The M&O rate is the component the entity's governing body controls — subject always to:
- The rate floor: the M&O rate may not be reduced below the level necessary to cover the entity's adopted annual MO budget plus the required 5% minimum buffer
- The CCR ceiling: M&O + I&S may never exceed the entity's tier CCR
- Voter approval for any increase above the current rate
- The Cumulative Budget Growth Cap (described in Part 5)
The governing body may reduce the M&O rate at any time by ordinary vote. It may not increase it without a voter election.
The I&S Rate — Interest and Sinking (Bond Debt Service)
The Interest and Sinking (I&S) rate is the portion dedicated entirely to the annual debt service on voter-approved bonds — the interest and principal payments the entity has legally committed to make. This rate component is set by law, not by the governing body. It is calculated by the Texas Comptroller based on the certified annual debt service schedule of the entity's outstanding voter-approved bonds, plus a buffer of not less than 5% and not to exceed 10% of the annual debt service amount.
The I&S rate has three defining characteristics:
- It cannot be increased by the governing body. Only a new voter-approved bond election — and the resulting Comptroller certification — can increase the I&S rate.
- It cannot be decreased by the governing body. The I&S rate reflects a legal obligation to bondholders. Only the Comptroller can recalculate it downward, and only when the underlying obligation decreases.
- It automatically reduces when bonds are paid off. When a bond matures or is defeased, the Comptroller recalculates the I&S requirement and the lower rate takes effect at the start of the next tax year — automatically, without any vote or resolution required. (The full mechanics of the I&S rate, the Citizens First bond sale requirement, and the I&S Reserve Fund are covered in Part 6 (Bond Management).)
The governing rule for every entity at all times: M&O Rate + I&S Rate ≤ Tier CCR
The Constitutional Cap Rates by Tier
The following table shows the CCR for each tier — the absolute maximum rate the constitutional amendment permits. No tier may ever exceed its CCR without a new constitutional amendment approved by Texas voters.
The Starting Cap Rate (SCR) shown is the rate at which the implementing legislation launches each tier on Day 1. The SCR is set by statute and may be adjusted by the Legislature downward, or upward by voters within the CCR, over time. The CCR is set by the constitution and is the only ceiling that matters in the long run.
| Tier | Entity Class | SCR (Day-1 Legislative Rate) | CCR (Constitutional Maximum) | What It Replaces |
|---|---|---|---|---|
| T1 | State of Texas | 1.00% | 2.00% | State sales tax + all other state taxes |
| T2 | Counties | 0.40% | 1.00% | County property tax levy |
| T3 | Cities | 0.60% | 1.00% | City property tax + local sales tax |
| T4 | School Districts | 1.20% | 1.50% | ISD M&O + I&S + state FSP funding |
| T5 | Statewide Special Districts | 0.05% | 0.50% | Statewide SD property tax levies |
| SYS | All Tiers Combined | 3.25% | 6.00% | Replaces current 8.25% combined cap — and all property taxes |
The combined CCR of 6.00% is lower than Texas's current 8.25% combined sales tax cap — and unlike the current cap, the constitutional CCR cannot be raised by the Legislature alone.
What the Legislature Does — and What the Constitution Holds
The constitutional amendment establishes the CCR for each tier and sets the structural rules that govern every rate in the system. It also authorizes and requires the Legislature to do two specific things in the implementing legislation:
- Establish the starting rate for each tier — the rate at which the plan launches on Day 1. The Legislature must set a starting rate for each tier that is sufficient to fund each tier's Total Replacement Obligation (TRO) — the revenue each tier must generate to replace what it currently collects from property taxes and applicable state taxes, plus a 10% structural buffer.
- Provide by law for all rate administration — the Comptroller's certification role, the I&S rate calculation process, the voter election procedures, the public reporting requirements, and the transition mechanisms covered throughout this article.
After the implementing legislation takes effect, the Legislature's direct role in rate-setting ends. Each taxing entity then controls its own rate independently, within the constitutional limits that apply to its tier. The Legislature controls only the State of Texas's own Tier 1 rate — it has no authority to adjust the rate of any county, city, school district, or special district after implementation. Each entity's governing body — commissioners court, city council, school board, or special district board — manages that entity's rate on its own, subject to:
- The CCR ceiling for its tier — the absolute maximum, set by the constitution, that no entity may ever exceed
- The M&O floor — the governing body may reduce its M&O sub-rate at any time by ordinary vote, but may not reduce it below the level needed to cover the entity's adopted annual M&O budget plus the required 5% minimum buffer
- Voter approval for any rate increase above the entity's current rate — the full mechanics of rate changes, including the increase and reduction rules, are covered in Part 4
What no entity — including the Legislature for its own Tier 1 rate — may do under the constitutional amendment:
- Set its rate above its tier's CCR, by any instrument, for any reason
- Raise its CCR without going to Texas voters for a new constitutional amendment
- Impose any mandatory fee, assessment, or charge whose primary economic effect supplements general revenues without going to voters — the circumvention lock in Part 2 closes this door
"The Constitutional Cap Rate of a tier is the maximum total rate that may be imposed by each individual taxing entity classified in that tier. It is not a fixed rate, a required rate, or a uniform rate... the rate of each taxing entity is determined individually by that entity... is not set by, tied to, indexed to, or affected by the rate of any other taxing entity in the same tier or in any other tier, and need not be uniform among the entities classified in a tier." "The rate applied to a taxable transaction is the sum of the rates then in effect for each taxing entity whose jurisdiction includes the location to which the transaction is sourced under Section 1-p of this article. That sum may not exceed six percent (6.00%) at any location in this state."
A Note on the AFR
Prior planning versions of this article referenced the Aggregate Floor Rate (AFR) — the algebraic minimum rate that would cover every tier's TRO with no surplus. The AFR (2.8559% combined) was a planning and analysis tool used to size the Transition Fund and prove the SCR generates adequate surplus. It is not part of the constitutional amendment and it is not part of the implementing legislation. Citizens do not need to know it. Governing bodies do not operate against it. It exists only in the analytical record that supports this plan. The operative rates citizens will see are the SCR (at launch, set by law) and the CCR (always, set by the constitution).
Rate Governance: Voter Approval to Go Up, Legislative Freedom to Go Down
The M&O rate is the only rate any governing body controls. It goes down when the governing body decides to lower it. It goes up only when the citizens of the jurisdiction say so. If citizens say no, the budget gets cut — not the citizens.
Why the Sales Tax Model Changes Everything
Because the TPTRP rate is applied to all taxable economic transactions in the jurisdiction — not to property values — every entity's revenue grows organically as economic activity in its jurisdiction grows. This aligns the interests of government with the economic well-being of its citizens in a way that property taxation structurally cannot: a government that wants more revenue must earn it by making its jurisdiction a better place to do business and raise a family, not by waiting for appraisal districts to inflate values.
The critical structural consequence of this alignment is that a governing body never needs a rate increase to keep pace with inflation or population growth. If the economy grows, revenues at the same rate grow with it. A rate increase is not a routine adjustment — it is a statement that the governing body believes it needs to provide materially more government than the current rate's revenue can fund, and it wants citizens to authorize that expansion.
The Two Sub-Rates — Only One Is Yours to Manage
Every entity's total rate consists of exactly two components:
- The I&S Rate — Interest and Sinking: Set by law. Calculated annually by the Texas Comptroller from the entity's certified bond debt service schedule. The governing body cannot increase it, cannot decrease it, and cannot touch it. It moves only when bonds are issued by voter approval or paid off by calendar. The full mechanics of the I&S rate are covered in Part 6 (Bond Management).
- The M&O Rate — Maintenance and Operations: Set by the governing body, within constitutional limits. This is the component the governing body controls. It funds salaries, services, maintenance, law enforcement, administration — everything that is not bond debt repayment.
The governing rule, always: M&O Rate + I&S Rate ≤ Tier CCR.
The rate governance rules in this Part apply exclusively to the M&O sub-rate. When this article refers to a rate reduction or a rate increase requiring voter approval, it means the M&O sub-rate. The I&S sub-rate is governed by law, not by this Part.
The Core Protection — Two Rules, No Exceptions
Rule 1 — Down at Will
Any governing body may reduce its entity's M&O rate at any time by ordinary vote of the governing body. No election is required. No Comptroller pre-approval is required. The only constraint: the resulting M&O rate must still be sufficient to generate projected revenues equal to or greater than the entity's adopted annual M&O budget plus the required 5% minimum operating buffer, as certified by the entity's Chief Financial Officer and verified by the Texas Comptroller.
A governing body may not reduce the M&O rate below that certified floor. Below the floor, the entity would be deliberately setting a rate it knows cannot fund its adopted obligations — which is a separate constitutional violation, covered in Part 5.
If a governing body wishes to reduce the rate below the floor, it must first reduce its adopted M&O budget to a level that the lower rate can support. Budget first, then rate. In this sequence — which is the correct fiscal sequence — the governing body is accountable to its citizens for the budget it adopts, not just the rate it sets.
Rule 2 — Up Requires a Vote
No governing body in Texas — including the Legislature for state of Texas — may increase its M&O rate above its current level for any reason without a voter-approved election within its jurisdiction. This rule applies to the State of Texas in exactly the same manner as it applies to every county, city, school district, and special district. There are no exceptions, no emergency provisions, and no administrative bypasses.
A proposed M&O rate increase election must state the specific new M&O rate being sought — not a range, not a ceiling, a single rate — the projected annual revenue at that rate based on the Comptroller's most recent certified Final Tax Base for the jurisdiction, and the specific purpose or budget need the additional revenue is intended to fund. The election must be held on a uniform election date within the jurisdiction and pass by a simple majority of votes cast. No voter-approved increase may bring the entity's total rate above the Constitutional Cap Rate for its tier.
If the election passes, the new M&O rate takes effect at the start of the next fiscal year following certification of the results.
If the election fails, the current M&O rate holds. The governing body must immediately initiate its Mandatory Expenditure Reduction Plan (described below). There is no second election, no rate suspension, and no interim emergency authority. The entity operates within its current rate's revenue until it either reduces its budget to fit or returns to voters with a new election in a future cycle.
Structural Improvement Over Current Law
Texas's current "voter-approval tax rate" system allows local governments to automatically increase the amount of revenue they collect by up to 3.5% per year above the prior year's levy — without any voter election — simply by setting the rate to the voter-approval tax rate as calculated by the appraisal roll. Because appraisals rise, the effective burden on property owners increases every year without a ballot. Citizens who object must organize a petition reaching 3% of registered voters within 89 days to trigger a rollback election — a process that is rarely used, rarely successful, and entirely unavailable for resisting the incremental creep that compounds over decades.
Under the TPTRP there is no formula, no automatic adjustment, and no appraisal mechanism that can raise the effective rate without a ballot. The default state is rate stability — the burden is always on those who want a higher rate to earn voter approval, not on those who want a lower rate to organize a petition. Economic growth increases revenues at the same rate as the economy grows, not at whatever an appraisal district determines. A governing body that has grown dependent on automatic annual increases will face the discipline of fixed-rate budgeting from Day 1.
How Citizens Govern the Rate
The TPTRP does not create a separate petition mechanism for citizens to force a rate reduction election. That is by design. The right and proper instrument for citizens who want a lower rate is the same instrument the Texas Constitution has always provided for self-governance: the regular election of their governing body. City council members, county commissioners, school board trustees, and state legislators are elected representatives whose entire fiscal authority — including the M&O rate — is subject to the verdict of the voters at each election. A citizen who believes the rate is too high votes for candidates who will reduce it. A governing body that refuses to reduce the rate when surplus is growing, services are adequate, and citizens are paying more than necessary will answer for that at the ballot box. This is not a limitation on citizen power — it is citizen power operating through its legitimate and durable channel, without the disruption and administrative burden that ad hoc petition elections create for every local taxing entity across the state.
The Mandatory Expenditure Reduction Plan
When a voter election to increase the M&O rate fails, the governing body is constitutionally required to adopt and execute a Mandatory Expenditure Reduction Plan (MERP) within 90 days of the certification of the election results.
What the MERP Must Contain
The MERP is a binding, publicly filed document that states the current M&O rate and the Comptroller-certified projected revenue at that rate for the upcoming fiscal year including the 5% minimum operating buffer; identifies every line item in the current adopted budget that exceeds the projected revenue ceiling; specifies the exact reductions — by department, program, or function — that will bring total M&O expenditures within that ceiling; states the timeline for each reduction with no reduction taking more than one full fiscal year to implement; is filed with the Texas Comptroller within 90 days of election result certification and published on the entity's official website no later than the filing date; and is adopted by formal vote of the governing body — not delegated to staff — with each member's vote recorded in the public record.
What the MERP May Not Do
The MERP may not propose a second voter election as a substitute for required reductions; defer required reductions beyond the current fiscal year without a specific, Comptroller-approved hardship justification; reduce bond debt service payments or use the I&S Reserve Fund to cover M&O shortfalls; transfer funds from the Infrastructure Fund, First Responder Fund, or Citizen Dividend Fund to cover M&O operating expenses; or identify as a reduction any one-time accounting adjustment, depreciation reclassification, or revenue reclassification that does not reflect a real reduction in services or personnel costs.
Comptroller Oversight of the MERP
The Texas Comptroller shall verify that each filed MERP is mathematically sufficient to bring the entity's expenditures within the certified revenue ceiling; publish all filed MERPs on the Local Government Transparency Portal within 10 days of receipt; monitor implementation compliance quarterly for the duration of the MERP's execution period; and withhold the entity's quarterly TPTRP distribution upon a finding that the entity has failed to implement the MERP on schedule. Any Texas citizen has standing to bring a civil action to compel MERP compliance, with prevailing citizens awarded reasonable attorneys' fees and costs.
This Applies to the State
Every rule in this Part applies to the State of Texas under Tier 1 in the same manner it applies to every county, city, school district, and special district. The Legislature may reduce the Tier 1 M&O rate at any time by ordinary legislative action. The Legislature may not increase the Tier 1 M&O rate without a statewide voter election. If a statewide rate increase election fails, the Legislature must adopt and file a MERP for Tier 1 within 90 days, reducing state appropriations to the revenue ceiling at the current rate. The Governor must sign the MERP adoption resolution. The Texas Comptroller verifies and publishes it.
No branch of state government — legislative, executive, or administrative — may increase the effective Tier 1 tax burden on Texas citizens by any mechanism other than a successful statewide voter election.
When the Voters Say No, the Answer Is No
Requiring an election is meaningless if a government that loses one can get the money anyway. Version 6 of the amendment closes that door completely.
"The rejection by the voters of a proposed rate increase is a determination by the taxpayers of the jurisdiction that the entity shall operate within the revenue its existing rate produces. On rejection, the governing body shall adopt and execute a Mandatory Expenditure Reduction Plan... and the entity is ineligible for assistance of any kind from the TPTRP Transition Fund, the TPTRP Transition Board, the TPTRP Transition Monitoring Division, or the economic stabilization fund until the entity's voters approve an increase. No officer, agency, board, or fund of this state may supply, offset, advance, or otherwise make good the revenue the voters declined to authorize."
Read that last sentence again, because it is the sentence that makes every other protection in this plan real. A city council that loses a rate election cannot go to Austin for a bailout. A school board that loses one cannot get the difference from the state. The taxpayers of that jurisdiction have set the budget, and the governing body's job is to live inside it.
State assistance is available to exactly one kind of entity: one whose voters have already approved a rate at the constitutional maximum for its tier and whose collections at that maximum still fall short of its Final Year Baseline. That is the Assistance Eligibility Standard, and it appears in Part 7.
How Often a Government May Ask
An entity may put a rate increase on the ballot at each uniform election date. After two rejections, it may not ask again for two years from the date the second election was canvassed. The two-year pause does not suspend anything the entity owes in the meantime — the Mandatory Expenditure Reduction Plan still runs, and any mandatory rate reduction triggered by the Actual Need Ratio still happens on schedule.
The design intent is straightforward. A government should be able to make its case to the voters and, if circumstances change, make it again. It should not be able to grind the same electorate down with the same question every six months until turnout drops far enough for it to pass.
Constitutional Provisions in This Part
"The governing body of any taxing entity may reduce its M&O rate at any time by action of the governing body and without a voter election, provided that the resulting rate is sufficient to generate projected revenues equal to or greater than the entity's adopted annual Maintenance and Operations budget plus a five percent minimum operating buffer, as certified by the entity's chief financial officer and verified by the comptroller."
"No taxing entity, including the State of Texas, may increase its M&O rate above its current rate for any reason without prior approval by a majority of the qualified voters of the affected jurisdiction voting at a lawfully conducted election held on a uniform election date."
"When an election to increase the M&O rate of a taxing entity fails, the governing body shall adopt and file with the comptroller a Mandatory Expenditure Reduction Plan not later than the 90th day after the date the election results are certified."
Fiscal Discipline: Budgeting Within Revenue, the Budget Cap, and Government Accountability
HJR Sections 1.04 and 1.09 → Article VIII, Section 1-n(f), (g), (l), (m) and 1-s(c), (i).
Every taxing entity under the TPTRP is constitutionally required to build its budget from its projected revenue — not from a spending wish list. Revenue is the ceiling. The budget works down from there.
What the Current Constitution Already Does
The Texas Constitution is not silent on fiscal discipline. Article VIII, Section 22 already imposes a spending limitation on the State of Texas: the rate of growth of state appropriations in any biennium may not exceed the estimated rate of growth of the state's economy. Article III, Section 49-g establishes the Economic Stabilization Fund — the constitutional "rainy day fund" mechanism for the State — funded by oil and gas severance tax overages and surplus general revenue balances.
Both provisions apply only to the State of Texas. Counties, cities, school districts, and special districts operate under no equivalent constitutional budget discipline. They face statutory voter-approval tax rate constraints — which, as explained in Part 4, allow automatic revenue growth every year without a ballot. But there is no constitutional requirement that any local entity's budget growth stay proportionate to its own revenue growth, no rainy day fund mandate, and no fiscal discipline sequence if an entity spends beyond its means.
The TPTRP constitutional amendment extends and strengthens the fiscal discipline principle of Art. VIII, Sec. 22 to every taxing entity in Texas, replaces the personal-income-growth index with each entity's own revenue-growth experience, and creates a binding constitutional budgeting methodology that governs how every entity builds its budget before it spends a dollar.
The TPTRP does not repeal Art. VIII, Sec. 22 or Art. III, Sec. 49-g. Both provisions are retained and continue to apply to the State of Texas. The TPTRP's fiscal discipline provisions operate alongside and supplement those existing provisions for Tier 1, and independently govern all other tiers.
The Constitutional Budgeting Sequence
Every taxing entity subject to this Article must build its annual M&O budget using the following constitutional sequence. This is not a suggested approach — it is the legally required order of operations. No governing body may adopt an M&O budget that exceeds the Total Budget Cap produced by this sequence.
Step 1 — Base M&O Revenue Projection
At the start of each budget cycle, the entity's Chief Financial Officer calculates the Base M&O Revenue Projection: the prior fiscal year's actual M&O-side collections, projected forward into the upcoming budget period using the Texas Comptroller's most recently certified Final Tax Base growth rate for the entity's jurisdiction. This figure represents the best available forward estimate of what the entity will collect at its current M&O rate given the trajectory of economic activity in its jurisdiction.
This is the entity's base revenue for budget planning purposes.
Step 2 — Available Base Revenue
From the Base M&O Revenue Projection, the Chief Financial Officer subtracts five percent (5%). The result is the Available Base Revenue — the maximum M&O operating expenditure the base revenue projection supports after reserving the constitutionally required minimum operating buffer.
The entity may not adopt an M&O budget that exceeds the Available Base Revenue unless the Cumulative Budget Growth Cap (Step 3) produces a lower ceiling, in which case the lower figure governs.
Step 3 — The Cumulative Budget Growth Cap: Allowed Budget Maximum
The TPTRP imposes a second, independent ceiling derived not from the upcoming year's projected revenue but from the growth rate of the entity's revenue since the most recent Qualified Rate Change Event — defined as any voluntary governing body rate reduction or voter-approved rate increase. This ceiling prevents the slow-creep budget expansion that has historically absorbed all benefits of economic growth before citizens ever see a rate reduction.
The calculation proceeds as follows:
First, the Chief Financial Officer determines the Cumulative Revenue Growth Rate since the last Qualified Rate Change Event: the percentage by which the entity's actual M&O-side collections have grown from the base period revenue (the revenue in the fiscal year of the last Qualified Rate Change Event) to the most recent completed fiscal year.
Second, the CFO determines the Allowed Budget Growth Rate: one-half of the Cumulative Revenue Growth Rate. The entity's M&O budget may not have grown by more than half the percentage that its revenue has grown since the last rate-setting event. The other half of revenue growth belongs to citizens — through Citizen Dividends, surplus waterfall distributions, and eventual rate reductions — not to expanded government operations.
Third, the CFO applies the Allowed Budget Growth Rate to the Budget Base at the Last Qualified Rate Change Event (the M&O budget as adopted in the fiscal year of that event) to produce the Allowed Budget Base: the maximum cumulative budget size permitted under the growth cap.
Fourth, the CFO subtracts five percent (5%) from the Allowed Budget Base to produce the Allowed Budget Maximum: the budget cap produced by the growth constraint, after reserving the minimum operating buffer.
Step 4 — The Total Budget Cap
The Total Budget Cap is the lower of:
- The Available Base Revenue (Step 2), or
- The Allowed Budget Maximum (Step 3)
No governing body may adopt an M&O budget in excess of the Total Budget Cap. The Total Budget Cap is certified annually by the entity's Chief Financial Officer and verified by the Texas Comptroller before the entity's budget may take effect.
Step 5 — Budget Allocation
Once the Total Budget Cap is established and Comptroller-verified, the governing body allocates expenditures within that ceiling according to its own priorities, subject to all other constitutional requirements — including the First Responders Fund minimum, the Infrastructure Fund minimum, and all waterfall obligations described in Part 8 of this Article.
"Every taxing entity shall adopt its annual Maintenance and Operations budget in accordance with the budgeting sequence established by this article. No entity may adopt an annual Maintenance and Operations budget that exceeds the Total Budget Cap. No budget adopted in excess of the Total Budget Cap takes effect, and no such budget may be filed."
Example: Willow County — Budgeting Within Revenue
Willow County adopted a voter-approved M&O rate increase five years ago. At that time, its M&O budget was $100 million and its M&O collections were $105 million.
Today, five years later, Willow County's M&O collections have grown to $126 million — a 20% cumulative revenue growth since the last Qualified Rate Change Event.
- Step 1 — Base M&O Revenue Projection: Using the Comptroller's certified growth rate, the CFO projects next year's collections at $128 million.
- Step 2 — Available Base Revenue: $128M × 0.95 = $121.6 million
- Step 3 — Allowed Budget Maximum:
- Cumulative Revenue Growth Rate: 20%
- Allowed Budget Growth Rate: 10% (one-half of 20%)
- Allowed Budget Base: $100M × 1.10 = $110 million
- Allowed Budget Maximum: $110M × 0.95 = $104.5 million
- Step 4 — Total Budget Cap: Lower of $121.6M and $104.5M = $104.5 million
Willow County's governing body may adopt an M&O budget of up to $104.5 million. If the county has been operating with a budget of $118 million, it must reduce expenditures to $104.5 million before its budget may take effect. The excess $13.5 million in projected collections above the Total Budget Cap flows into the waterfall.
The Anti-Laundering Rule on Qualified Rate Changes
When a governing body voluntarily reduces its M&O rate — which resets the Qualified Rate Change Event baseline — the Budget Base at the new Qualified Rate Change Event is set to the lower of: (a) the entity's actual adopted M&O budget in the year of the reduction, or (b) the Allowed Budget Maximum that would have applied under the prior cumulative window. This prevents a governing body from using a voluntary rate reduction to launder an over-budget position — resetting the baseline to a higher budget than the growth cap would have permitted.
The same rule applies to voter-approved rate increases. When voters approve an increase, the Budget Base resets to the entity's actual adopted M&O budget in the year of the increase — not to some hypothetical higher budget the governing body might have adopted if the cap had not applied.
Automatic, compelled rate changes — bond payoff reductions, I&S over-collection reductions, and ANR-triggered mandatory reductions — do not constitute Qualified Rate Change Events and do not reset the baseline.
"The Maintenance and Operations budget of a taxing entity may not grow, measured from the most recent Qualified Rate Change Event, by a percentage exceeding one-half of the cumulative growth in that entity's Maintenance and Operations revenue measured over the same period."
The Actual Need Ratio — The Mandatory Rate Reduction Trigger
The Cumulative Budget Growth Cap limits how fast budgets may grow. The Actual Need Ratio (ANR) is the separate mechanism that requires governing bodies to seek a rate reduction when revenues are consistently outpacing need.
At the close of each fiscal year, the entity's Chief Financial Officer calculates and certifies to the Texas Comptroller a single figure: the Actual Need Ratio — actual M&O-side cash collections divided by actual M&O cash need (adopted M&O expenditures plus I&S bond debt service plus the 5% minimum buffer).
The ANR calculation may not be offset by investment earnings, reserve contributions, or interfund transfers. Surplus is measured on actual cash collections versus actual cash obligations only.
The ANR mandatory rate reduction rule is subject to one prerequisite: it activates only after the entity has fully funded its Stabilization Fund to its required six-month minimum balance. Once that prerequisite is met, the trigger applies going forward. If the Stabilization Fund drops below the minimum, the trigger suspends until restored.
When the ANR exceeds 1.10 for two consecutive fiscal years — meaning the entity is collecting at least 10% more than it needs, after the buffer, in each of two consecutive years — the governing body is required by law to place on the ballot at the next scheduled election a proposal to reduce the M&O rate to the rate that would produce an ANR of no more than 1.05. The governing body may not block, delay, or substitute an alternative ballot measure for this requirement. If voters approve the reduction, the entity executes a budget reduction plan — as required by Part 4 — to bring M&O expenditures within the revenues produced by the reduced rate, after the 5% buffer. If voters reject the reduction, the current rate holds and the ANR two-year clock resets.
"When an entity's Actual Need Ratio exceeds one and one-tenth for two consecutive fiscal years, and the entity's Stabilization Fund has been funded to its required Six-Month Minimum Balance under Section 1-s of this article, the governing body shall place on the ballot at the next scheduled election a proposition to reduce the M&O rate to the rate that would produce an Actual Need Ratio of not more than one and five-hundredths."
The Stabilization Fund and Fiscal Distress
Every entity subject to this Article must maintain a Stabilization Fund — the reserve commonly known as a rainy day fund — with a minimum balance equal to six months of the entity's Full Budget Funding Amount: its most recently adopted annual M&O budget plus its certified annual I&S bond debt service. This is the same Six-Month Minimum Balance defined in Part 8, and it applies identically at every tier. This fund is the entity's first line of defense against revenue shortfalls, unexpected obligations, and economic contractions that temporarily reduce sales tax collections below the entity's budget floor.
Fiscal Distress Trigger
When an entity's Stabilization Fund balance falls below fifty percent (50%) of the required minimum balance, a Fiscal Distress Condition is declared. A Fiscal Distress Condition requires:
- The governing body must immediately notify the Texas Comptroller in writing, with a full accounting of the causes of the fund drawdown
- The governing body must adopt and file a Fiscal Recovery Plan within sixty (60) days — specifying the exact steps and timeline by which the entity will restore the Stabilization Fund to its minimum balance
- The entity's quarterly TPTRP distribution is suspended and held in a Comptroller-managed account until the Fiscal Recovery Plan is filed and certified as sufficient
- During the Fiscal Distress Condition, the governing body may not approve any new non-essential expenditures, new personnel positions, or capital projects not already under contract
The Constitutional Reduction Sequence
If fiscal distress is not resolved within one fiscal year of the Fiscal Distress declaration, the Texas Comptroller may appoint a fiscal manager for the entity. When reductions become necessary — whether through a Fiscal Distress Condition, a failed rate increase election, or an ANR-triggered reduction — they must proceed in the following constitutional order. This sequence is not discretionary:
- Eliminate all discretionary non-essential spending first
- Reduce non-first-responder administrative and operational personnel
- The constitutional floor: first responder services, court and justice services, and essential utilities may never be reduced below the level necessary to sustain public safety and essential service delivery
Due Process Before Fiscal Manager Appointment
Before the Texas Comptroller appoints a fiscal manager for any taxing entity: the Comptroller must issue a written Notice of Trigger Determination; the governing body has thirty (30) days to submit a written response; the Comptroller issues a Final Determination within fifteen (15) days; the governing body may appeal to Travis County district court within fifteen (15) days, with the court ruling within thirty (30) days; and if no appeal is filed or the appeal is denied, the Comptroller proceeds with fiscal manager appointment. The elected governing body retains its elected status throughout the fiscal management period — the fiscal manager operates alongside the governing body, not in place of it.
Funding Assistance During Fiscal Distress
When an entity is in a declared Fiscal Distress Condition, the following support mechanisms are available, in order of priority: the TPTRP Transition Fund (primary initial source during the Transition Period); the State Economic Stabilization Fund, which may provide no-interest operational loans repayable as a percentage of annual surplus once the entity returns to fiscal compliance; and as a last resort, dissolution and absorption into a neighboring or overlapping entity, if the entity cannot achieve fiscal compliance as an independent government.
"Every taxing entity shall maintain its Stabilization Fund at or above the Six-Month Minimum Balance. The Six-Month Minimum Balance is a constitutional floor — it is not a target." The Six-Month Minimum Balance is 50% of the entity's Full Budget Funding Amount — its adopted M&O budget plus its certified annual I&S debt service. Falling below half of that minimum triggers a Fiscal Distress Condition, a mandatory Fiscal Recovery Plan, and escrow of the entity's waterfall distributions. The Bond Service Levy is never escrowed.
Public Reporting — Mandatory, Not Optional
After the first full year of TPTRP collections, each entity moves to annual budget-based planning using the constitutional budgeting sequence above. Every taxing entity must maintain a publicly accessible section of its official website and post to the Texas Comptroller's Local Government Transparency Portal the following, updated within 30 days of any change or within 60 days of fiscal year close:
- Current tax rate — total rate, I&S sub-rate, M&O sub-rate, current floor, and rolling 10-year rate history
- Current financial status — actual year-to-date collections, planned versus actual expenditures, buffer balances
- Fund balances — Stabilization Fund, Infrastructure Fund, First Responder Fund, I&S Reserve Fund, Citizen Dividend Fund
- Waterfall distributions — amounts distributed to each fund and dividend per citizen, within 30 days of each distribution
- Adopted annual budget — full budget in searchable format with year-over-year comparisons
- Bond and debt status — all outstanding bonds, annual debt service schedule, and projected payoff dates
- Financial officer advisement — the CFO's written recommendations at each budget and waterfall decision point, alongside the governing body's recorded vote
- Citizens Budget Summary — a plain-language one-page explanation of what the entity collected, spent, and distributed, written for a general audience
- Comptroller Budget Certification — the annual verification that the adopted budget does not exceed the Total Budget Cap, filed publicly within 10 days of certification
- Mandatory Expenditure Reduction Plan (if applicable) — filed pursuant to Part 4 of this Article
These disclosures are not voluntary. Failure to comply within the required deadlines triggers a financial reporting penalty enforced by the Texas Comptroller and suspends the entity's quarterly TPTRP distribution until compliance is restored.
How the Caps Apply to the State Itself
Every rule in this Part binds the State of Texas exactly as it binds a city — but the State budgets in two-year cycles, not one, and the amendment reconciles the two rather than leaving it to argument. Under Section 1-n(m)(5), the Total Budget Cap and the Cumulative Budget Growth Cap apply to each biennial appropriation measured against the corresponding two-year period, while the Actual Need Ratio, the surplus waterfall, and the public disclosure requirements are computed annually for each state fiscal year inside the biennium.
The same subsection settles the federal funds question. Federal money the State receives and appropriates for the purpose it was received for is not part of the State's Maintenance and Operations budget for cap purposes, and is not part of the State's distributable surplus. Federal pass-through dollars neither inflate the cap nor get returned to Texans as a dividend, which is the correct treatment for money Texas does not raise and does not own.
"Every taxing entity shall maintain on its official public website, and shall transmit to the comptroller for publication on the Local Government Transparency Portal, updated within 30 days of any material change and within 60 days of the close of its fiscal year..." Eleven categories must be published, including the rate and a rolling 10-year rate history, collections against budget, every fund balance, the per-citizen value of every waterfall distribution, all outstanding bonds and payoff dates, the chief financial officer's written advisement and the governing body's recorded vote at each decision point, the comptroller's Total Budget Cap certification, the two-year Interest and Sinking over-collection status, and — for a school district — maintenance and operations revenue per enrolled student.
The Bond Rate: Set by Law, Automatic, and Self-Eliminating
HJR Sections 1.02, 1.04, and 1.05 → Article VIII, Section 1-e(c), 1-n(h) through (k), and 1-o.
How voter-approved bond obligations are funded, protected, and — when paid off — automatically retired from the rate. Plus: the Citizens First Bond Sale Requirement, the I&S Buffer at Issuance, the single-fund shortfall cascade, and the conforming amendments that extend every protection to home-rule cities, school districts, and charter schools.
Every voter-approved bond obligation in Texas carries forward under the TPTRP. The funding source shifts from property tax to sales tax; the payment schedule does not change by a single dollar or a single day. This guarantee runs through seven separate constitutional amendments, each doing a distinct job — from the core savings clause and rate mechanics, to conforming changes that reach every corner of Texas's existing bond law so nothing is left exposed.
Amendment 1 — The Savings Clause: Section 1-e
Before anything else, the constitution has to answer the bondholder's first question: does abolishing property tax put my bond at risk? Section 1-e answers no, directly and explicitly, at the same moment it abolishes ad valorem taxation statewide.
"Nothing in this section shall impair the obligation of any bond, note, or other obligation issued by any taxing entity in reliance upon the ad valorem taxing authority repealed herein. All such pre-abolition obligations remain valid and enforceable. Payment of such obligations is guaranteed and secured as provided in Article VIII, Section 1-o of this Constitution."
This is a deliberate legal choice, not boilerplate: the U.S. Supreme Court held in United States Trust Co. v. New Jersey (1977) that substituting an equivalent revenue source for a repealed tax does not impair a bond contract so long as the underlying obligation is fully preserved — and Section 1-e(c) is written to satisfy exactly that standard, closing off any Contract Clause challenge before it can be raised.
Amendment 2 — The Rate Mechanics: Section 1-n(h)–(k)
Within every entity's tier rate, there are two sub-components: the I&S Rate (Interest & Sinking) and the M&O Rate (Maintenance & Operations). The I&S Rate is not something a governing body sets — it is a number the Comptroller calculates and certifies by formula.
- The I&S Rate: The portion dedicated entirely to annual bond debt service plus the required buffer. Calculated annually as the certified debt service requirement plus a buffer of not less than 5% and not more than 10%, divided by the entity's share of the Final Tax Base, and certified to the Comptroller.
- The M&O Rate: Everything else — salaries, services, day-to-day operations. The component the governing body controls, subject to the rate floor, voter approval for any increase, and the CCR ceiling.
Together: I&S Rate + M&O Rate = Entity's Total Rate ≤ Tier CCR
| Tier | SCR Total | Annual Bond Debt Service | I&S Rate (Law-Set) | M&O Rate (Gov. Body) |
|---|---|---|---|---|
| T1 — State | 1.00% | $713.9 million | 0.0100% | 0.9900% |
| T2 — Counties | 0.40% | $3.85 billion | 0.0540% | 0.3460% |
| T3 — Cities | 0.60% | $5.28 billion | 0.0740% | 0.5260% |
| T4 — School Districts | 1.20% | $12.43 billion | 0.1744% | 1.0256% |
| T5 — Statewide SDs | 0.05% | $0 | 0.0000% | 0.0500% |
| SYS — All Tiers | 3.25% | $22.27 billion | 0.3124% | 2.9376% |
Section 1-n(h) gives this rate teeth in seven numbered provisions: debt service payments are senior to all M&O spending and waterfall distributions (1); the I&S Rate is set exclusively by Comptroller certification, not governing body action (2); every entity must report its bond status and I&S Reserve Fund balance for public posting (3); the rate automatically decreases on bond retirement with no vote required (4); the rate automatically decreases when the I&S Reserve Fund overflows its cap (5); the rate can never be raised above certified need without a new bond election (6); and if collections ever fall short, the Comptroller is constitutionally empowered to invoke the shortfall cascade in Section 1-o so no bondholder is ever left waiting (7).
Section 1-n(i) makes voter approval for new debt universal — applying to the State of Texas exactly as it applies to every county, city, school district, and special district. No emergency declaration, executive order, or legislative act may waive this requirement. Before any bond election may even be called, the Comptroller must certify that the resulting I&S Rate, added to the entity's existing total rate, will not push the entity above its tier's Constitutional Cap Rate. Every bond approved under this subsection is automatically subject to the Citizens First Bond Sale Requirement.
Section 1-n(j) builds the rate-control asymmetry that runs through the entire TPTRP: any increase to an entity's M&O rate requires a new voter election, while any decrease — including automatic I&S reductions on bond retirement or over-collection — takes effect without one. Rates only go up by citizen vote; they only come down automatically.
Section 1-n(k) extends the bond framework specifically to school districts and rebuilds school finance around it. Each district funds its own maintenance, operations, and bond debt service from its own Tier 4 rate on the transactions sourced inside its boundaries; the Foundation School Program and Chapter 48/49 recapture are superseded; and no distribution to a district may be based on enrollment, attendance, or property wealth. Each district remains the primary obligor on its own bonds under subsections (h) and (j), with PSF-guaranteed bonds additionally governed by Article VII, Section 5(h). Part 6B takes this up in full.
The Automatic Rate Reduction on Bond Retirement
When a bond is paid off, the I&S rate component associated with that bond automatically decreases the following fiscal year — no vote, no resolution, no governing body action.
Example: Willow County has a 0.40% total rate. Of that, 0.05% is the I&S rate on a courthouse bond maturing in
- When that bond is paid off, Willow County's rate automatically drops to 0.35% on January 1, 2033.
The same automatic mechanic works in reverse for over-collection: when actual I&S collections exceed the certified debt service requirement plus buffer, the excess sweeps into the I&S Reserve Fund, and once that fund exceeds two times annual debt service, the Comptroller is constitutionally required to reduce the rate the following year — again with no governing body vote.
Amendment 3 — Section 1-o: The Bond Management Article
Section 1-o is the dedicated constitutional article governing bond guarantees, citizen bond sales, and the shortfall cascade. Its definitions subsection (a) establishes the technical vocabulary the rest of the article depends on — Pre-Abolition Bond, Bond Service Levy, the I&S Reserve Fund, Stabilization Fund, Economic Stabilization Fund, Citizens First Period, Constitutional Cap Rate, and a precisely three-part Revenue Bond test designed to stop an entity from mislabeling a tax-backed bond to dodge every protection that follows.
One fund, two jobs. A key structural choice in this article is that each entity maintains a single I&S Reserve Fund rather than two separate reserve accounts. That one fund does double duty — it is simultaneously the operating account the entity draws on to make its scheduled bond payments and the entity's first-line emergency reserve if collections ever fall short. No entity is required to establish, fund, or maintain any separate or additional bond reserve fund; the definitions subsection is explicit that the I&S Reserve Fund is "the sole entity-level bond reserve contemplated by this Constitution."
Each entity remains its own obligor — Section 1-o(b). Shifting from property tax to sales tax revenue does not transfer anyone's debt to the State. Every entity — including the State itself — must apply its Bond Service Levy collections as the first priority use of its revenue each period, ahead of M&O spending and waterfall distributions. The State's guarantee under 1-o(b)(5) is unconditional and irrevocable, but it is a backstop of last resort, not a substitute for the entity's own servicing duty.
Revenue substitution, not impairment — Section 1-o(c). The Bond Service Levy is made the legal successor to the repealed ad valorem I&S levy for every existing bond covenant, indenture, and disclosure agreement — meaning no bondholder has a valid claim that the funding-source switch itself impairs their contract, since the State's guarantee is a security enhancement, not a diminishment.
The Citizens First Bond Sale Requirement — Five Stages, Not One
Section 1-o(d) constitutionalizes a five-stage hierarchical cascade, and no stage may be skipped or opened early.
| Stage | Who May Buy | Duration | Denomination |
|---|---|---|---|
| 1 — Entity Citizens | Adult residents of the issuing entity's own jurisdiction | 30 days | $100–$500 |
| 2 — Next-Tier-Up Citizens | Residents of the next-higher overlapping jurisdiction (e.g., county residents for a city bond) | 30 days | $100–$500 |
| 3 — Statewide Citizens | Any adult Texas resident | 30 days | $100–$500 |
| 4 — Texas-Domiciled Entities | Businesses with principal place of business in Texas | 30 days | $5,000 standard |
| 5 — General Bond Market | Institutional underwriters and investors | Standard placement | $5,000 standard |
At Stage 1, not less than 25% of the offering is reserved for citizens of the issuing jurisdiction — and if citizen demand exceeds 25%, the entity may raise that allocation up to 100%, meaning an entire bond issuance can be sold entirely to local citizens if demand supports it. Bonds in Stages 1 through 3 are offered in denominations as small as $100, require no brokerage account, and can be purchased through the Comptroller's citizen bond portal or by mail. Interest earned in these stages is treated as tax-exempt municipal bond interest under federal law. Stage 4 tightens who counts as "Texas-domiciled" — an entity must have its actual principal place of business here, not merely a registered agent, closing a loophole that would otherwise let an out-of-state firm claim in-state priority.
The enforcement mechanism has real weight: any adult citizen of the jurisdiction may sue in district court to void a Stage 5 institutional placement that occurred before the prior stages were properly completed — without needing to prove personal financial injury — and a prevailing citizen recovers attorneys' fees.
The Rate Comes Down on Its Own as Commerce Grows
The I&S rate is certified by the comptroller at the level needed to cover the year's certified debt service plus a buffer of not less than 5% and not more than 10%. Three separate mechanisms force it down and none of them requires a vote of any governing body:
- Bonds retire. As principal is paid off, the certified obligation falls and the rate falls with it. When the last bond is paid, the I&S rate goes to zero.
- The reserve fills. When the I&S Reserve Fund exceeds twice annual debt service, the rate is reduced.
- Collections outrun the obligation. This is the newest protection, and the one that matters most in a growing economy. When an entity's actual I&S collections exceed its certified annual debt service by more than 10% in two consecutive fiscal periods, the comptroller recalculates the rate down to the level producing debt service plus the 5% minimum buffer.
The two-period requirement exists so a single unusually strong year does not whipsaw the rate down and back up. The purpose, in the words of the amendment, is "to return the benefit of economic growth to the taxpayer: as the transaction base in an entity's jurisdiction grows, the portion of the rate dedicated to debt service declines automatically toward the minimum buffer rather than accumulating."
Every taxing entity must publish its two-year collections-to-debt-service ratio and state whether the step-down has been triggered or is one period away from triggering, so citizens can see the reduction coming before it arrives.
The Bond Payment Can Never Be Withheld
The amendment gives the comptroller real enforcement teeth — an entity that misses a Mandatory Expenditure Reduction Plan deadline, fails to publish required disclosures, or falls into Fiscal Distress can have its quarterly distribution withheld or escrowed. Every one of those provisions stops at the same line: only the Maintenance and Operations portion may ever be withheld. The Bond Service Levy continues to flow to the entity's I&S Reserve Fund without interruption, no matter what the entity has done wrong. Enforcement is aimed at the government, never at the bondholder.
Bonds Backed by the Other Abolished Taxes
The abolition list in Part 2 reaches beyond property taxes, and a great deal of Texas municipal debt is secured by the taxes it reaches — convention centers and arenas pledged against hotel occupancy and venue taxes, transit debt pledged against a metropolitan transit authority's sales tax, and economic development debt pledged against a Type A or Type B corporation's sales tax.
Section 1-o(g-1) sweeps all of it into the same guarantee. An obligation outstanding on the Implementation Date that is payable from or secured by any tax abolished by Section 1-m(c), or by a local sales tax absorbed into a tier rate, is a Pre-Abolition Bond: guaranteed by the State on identical terms, serviced from the Bond Service Levy, with access to the I&S Reserve Fund and the shortfall cascade, and requiring no new election, no new pledge, and no amendment to any bond resolution or trust indenture.
The same subsection answers the follow-on question. The operating cost of a facility formerly supported by an abolished tax — a convention center's annual subsidy, for example — becomes an ordinary maintenance and operations expenditure of the entity that owns it, paid from its M&O rate and subject to the Total Budget Cap. It may not be charged to the Bond Service Levy, the I&S Reserve Fund, or any of the constitutional funds.
"Failure to comply with the hierarchical offering sequence of this subsection renders the bond placement voidable as to any Stage 5 placement that occurred before the prior stages were completed. Any adult citizen-resident of the issuing entity's jurisdiction may bring a civil action in a district court of competent jurisdiction to void a noncompliant placement. The citizen need not demonstrate individual financial injury to have standing."
The I&S Reserve Fund — Section 1-o(e): Single Fund, Dual Function
Section 1-o(e) locks in the single-fund structure at the operating level. Every entity, including the State, must maintain its I&S Reserve Fund at a balance between one and two times its certified annual bond debt service. When that balance exceeds two times, the Comptroller automatically reduces the I&S Rate the following year — no governing body action required. The fund is legally segregated and purpose-restricted: no amount may be diverted to the general fund, M&O budget, or waterfall distributions except for bond principal and interest or the shortfall cascade in subsection (f).
The Shortfall Cascade — Four Tiers Before a Bondholder Ever Waits
If an entity's Bond Service Levy collections in any period fall short of scheduled debt service, Section 1-o(f) establishes a strict, self-executing escalation — no tier may be accessed until the prior tier is drawn to its floor, and no act of the Legislature or executive order may override it once triggered.
- Tier A — Entity's own I&S Reserve Fund, drawable down to 50% of its required one-times minimum.
- Tier B — Entity's own Stabilization Fund, drawable down to 50% of its six-month minimum.
- Tier C — Next-tier-up Economic Stabilization Fund (county ESF for cities/ISDs/special districts; State ESF for counties).
- Tier D — State Economic Stabilization Fund, as the final layer, with draws mandatory and self-executing — no separate appropriation required.
If a governing body fails to initiate the cascade in time, the Comptroller has direct authority to initiate the draw without waiting for that entity's action. Beyond an entity's own I&S Reserve Fund, no other entity's I&S Reserve Fund is ever accessible in this cascade — only ESF funds at Tiers C and D — which prevents one jurisdiction's shortfall from raiding a neighboring jurisdiction's dedicated bond fund.
Special District Absorption — Voter-Approved on Both Sides
Section 1-o(g) allows a Tier 5 special district to be absorbed into a county or city only if voters in both jurisdictions separately approve it on the same election date — and the Comptroller must certify in advance that the combined rate after absorption still fits under the host entity's CCR. If either election fails, or the combined rate would breach the cap, the absorption cannot proceed. Absorbed bonds carry the same State guarantee and cascade access as every other bond.
The Revenue Bond Definition — Closing the Relabeling Loophole
Section 1-o(h) closes the loop opened by the definitions in subsection (a): after the ad valorem prohibition takes effect, every new bond must be payable either from the Bond Service Levy or from genuine enterprise revenue as a true Revenue Bond. A bond only qualifies as a Revenue Bond if it has zero pledge — direct, contingent, or residual — against any tax revenue, is not marketed on the basis of any taxing power, and the governing body certifies this in the bond resolution itself. Anything that fails even one of the three tests is treated as a general obligation bond for every purpose of this article, regardless of what it's called on paper, and Section 1-o(h) explicitly forbids using the "revenue bond" label to dodge the Citizens First requirement, the voter approval requirement, or cascade access.
Amendments 4 Through 7 — Closing Every Remaining Door
Four additional conforming amendments extend the same protections into corners of the existing constitution that would otherwise remain governed by pre-TPTRP rules.
Amendment 4 — Article XI, Section 5(d): Home-Rule Cities. Home-rule cities operate under a distinct constitutional debt authority that predates the TPTRP. This conforming amendment closes that gap directly, requiring every home-rule city to obtain voter approval for any new debt and to comply with the full Citizens First Bond Sale Requirement and CCR certification — with no exception for a home-rule charter provision that might otherwise claim independent debt authority.
Amendment 5 — Article VII, Section 3(e): ISD Ad Valorem Repeal. The existing constitution separately authorizes the Legislature to permit ad valorem taxation specifically for school districts. This amendment repeals that authorization outright and substitutes the Tier 4 sales and use tax mechanism as the district's sole funding source for M&O and bond debt service, foreclosing any future Legislature from reviving a school property tax through this separate constitutional door.
Amendment 6 — Article VII, Section 5(h)–(i): PSF and Charter School Bonds. The Permanent School Fund's existing bond guarantee for ISDs is preserved intact, with the Bond Service Levy substituting as the revenue source behind PSF-guaranteed bonds and the State's Section 1-o(b)(5) guarantee acting as secondary backup if a PSF draw doesn't fully cover the payment. Charter schools present a distinct problem, since they are not taxing entities and collect no Bond Service Levy of their own — the amendment solves this with an automatic, self-executing State co-guarantee that activates the instant a charter school bondholder draws on the PSF guarantee, giving charter bondholders practical payment security equivalent to ISD bondholders without requiring charter schools to maintain an entity-level I&S Reserve Fund they have no revenue source to fund.
Amendment 7 — Article III, Section 49-j(e)–(f): State Debt Limit. The State's existing constitutional debt limit caps annual debt service at a fixed ratio of unrestricted general revenue. This amendment clarifies that Bond Service Levy collections are treated as a dedicated fund and do not count against that ratio — preventing the State's own guarantee obligations under Section 1-o from crowding out its capacity to issue other voter-approved state bonds — while separately confirming that the State itself is bound by the same universal voter-approval requirement as every local entity.
The Ballot Language
This amendment is proposed for the November 2, 2027 ballot as a single, unified proposition covering the full bond management framework.
"The constitutional amendment abolishing ad valorem property taxes in Texas at every level of government, replacing property tax revenue with a flat sales and use tax, guaranteeing payment of all outstanding bonds through a State guarantee, requiring voter approval for all future government borrowing, and establishing a citizens-first bond sale requirement giving Texas residents the first opportunity to purchase government bonds."
School Finance: Every District Funds Itself, and Nobody Gets Recaptured
Implements HJR Sections 1.04 and 4.01 through 4.05 — Article VIII, Section 1-n(k) and Article VII, Section 1, 3, 3-b, and 5.
HJR Section 1.04 → Article VIII, Section 1-n(k); HJR Sections 4.01–4.05 → Article VII, Section 1,
3, 3-b, and 5.
Of everything in this amendment, the school finance provisions change the most about how Texas actually works. Property tax abolition ends the school district's tax. But Texas school districts have not been funded by their own tax alone for half a century — they have been funded by a state formula that measures enrollment, attendance, and property wealth, and by a recapture system that takes money collected in one community and spends it in another.
The TPTRP ends all of it.
What Goes Away
The Foundation School Program. Chapter 48 of the Education Code — the entitlement formula, the basic allotment, the weighted allotments, the tier-one and tier-two structure, the whole apparatus by which the State computes what a district "deserves" and transfers it — is superseded on the Implementation Date and directed to be repealed in the implementing legislation.
Recapture. Chapter 49 — Robin Hood — goes with it, and the amendment forecloses its return in categorical language:
"No independent school district may be required to remit any portion of its collections, its fund balances, or its distributions to the State, to any other district, or to any recapture, equalization, or redistribution fund, and the Legislature may not enact a successor to those provisions by any name or in any form."
Enrollment-based allocation. This one deserves emphasis, because early drafts of this plan got it wrong and the final amendment fixes it. There is no state formula distributing money to school districts under the TPTRP — not by enrollment, not by average daily attendance, not by property valuation, not by wealth per student, not by any measure of comparative capacity. Section 1-n(k)(2) forbids all of it, and forbids imposing any per-student funding floor or ceiling on a district's own collections. The comptroller remits to each district the tax collected inside that district, in exactly the same way it remits to a county or a city.
What Replaces It
Each district is a Tier 4 taxing entity that funds itself from its own rate, on the transactions sourced inside its own boundaries, under Section 1-p.
And each district sets that rate the same way every other government in Texas does under this plan: the board of trustees may lower it by recorded vote, and only the district's voters may raise it, never above the Tier 4 Constitutional Cap Rate of 1.50%. A school board that wants more revenue asks the people who pay for it. A school board that has more than it needs can give it back without asking anyone.
Section 1-n(k)(5) then makes the parity explicit and complete. An independent school district is subject to every provision of the plan on the same terms as every other taxing entity:
| Requirement | Where it lives | Applies to ISDs |
|---|---|---|
| Total Budget Cap and Cumulative Budget Growth Cap | Sec. 1-n(f) | Yes |
| Actual Need Ratio and mandatory rate-reduction ballot | Sec. 1-n(g) | Yes |
| Mandatory Expenditure Reduction Plan after a failed election | Sec. 1-n(e) | Yes |
| Mandatory public disclosure | Sec. 1-n(l) | Yes |
| I&S rate, voter approval for all new debt | Sec. 1-n(h), (i) | Yes |
| Bond guarantee, Citizens First, I&S Reserve Fund | Sec. 1-o | Yes |
| Stabilization, Infrastructure, First Responder, and Citizen Dividend Funds | Sec. 1-s | Yes |
| Surplus waterfall and Citizen Dividend | Sec. 1-t | Yes |
A school district builds a reserve. A school district funds its own infrastructure. A school district returns its surplus to the families in the district as a Citizen Dividend. None of that exists in Texas school finance today.
The Baseline Protects the District
A district's Final Year Baseline is not just its old property tax levy. Under Section 1-n(a)(15) it is the district's final-year ad valorem revenue plus its Foundation School Program entitlement plus every other form of state funding it received that year. The district is measured against everything it used to get, from every source.
That matters for two reasons. It sets the standard the starting rate has to meet. And it gives a board a plain, honest case to take to its voters: at this rate, we collect what we used to collect from all sources combined — no more.
Accountability Is Untouched
Nothing in this amendment loosens the rules that govern how a district is run. Section 1-n(k)(8) preserves every existing provision of the constitution and general law governing district governance, financial accountability, academic accountability, auditing, reporting, sanction, conservatorship, management, and dissolution. A district that mismanages its money or fails its students remains subject to every remedy the Texas Education Agency has today.
Local control over the rate is not a shield against consequences for what the district does with it.
The Constitutional Question — Article VII, Section 1
Here is the hard problem, stated honestly rather than buried.
Article VII, Section 1 of the Texas Constitution requires the Legislature to maintain "an efficient system of public free schools." For four decades, in the Edgewood line of cases, Texas courts have read efficiency to require that districts have substantially equal access to similar revenue at similar tax effort — and they measured that access against property wealth. A funding system where a commercial-corridor district and a bedroom-community district collect very different amounts at the same rate is exactly the kind of system that produced those rulings.
The TPTRP does not dodge that. It amends Article VII, Section 1 directly and states what an efficient system is under the new structure:
"A system meeting the requirements of Subdivisions (1), (2), and (3) of this section is an efficient system of public free schools within the meaning of this section. The efficiency required by this section is measured by equal access to a uniform maximum rate and by the guaranteed sufficiency of funding for the general diffusion of knowledge, and is not measured by equality of taxable transaction base, of collections per student, or of expenditures per student among districts. No court may order, and the Legislature may not enact, a remedy under this section that requires one school district to remit any portion of its collections to the State, to another district, or to any equalization or redistribution fund."
The three subdivisions it refers to are the substance of the guarantee: every district levies within the same constitutional maximum and sets its own rate through its own board and voters; every district is guaranteed assistance sufficient to fund the general diffusion of knowledge when its collections at that maximum fall short; and every district gets economic development support aimed at building its own base to the point of self-sufficiency.
That is the answer to Edgewood, and it is a real one. The equity concern in those cases was that poor districts could not reach adequate funding no matter how hard they taxed. Under the TPTRP, a district that taxes to the maximum and still cannot fund the general diffusion of knowledge receives the difference — from the Transition Fund during the transition, and from the economic stabilization fund through the Transition Monitoring Division permanently thereafter. The floor is guaranteed. What is not guaranteed is equality of outcome between a district with a mall and a district without one, and the amendment says so in plain terms rather than leaving it for a court to discover.
The Assistance Is Conditional — And That Is the Point
A district does not get help by asking. Under the Assistance Eligibility Standard in Section 1-u(b-1), applied to school districts by Section 1-n(k)(7), a district qualifies only when its voters have approved a rate at the full 1.50% Tier 4 cap and its collections at that rate still fall short of its Final Year Baseline.
A district whose voters rejected a rate increase does not qualify. It adopts a Mandatory Expenditure Reduction Plan and lives within what its community authorized. The Article VII, Section 1 guarantee is written to match: a district whose voters declined an increase "is not entitled to assistance under this subdivision, the level of funding the district's voters have authorized being the level the district shall operate within."
The $10,000 Disclosure
One new transparency requirement applies only to school districts. Every district must publish its total maintenance and operations revenue divided by enrolled students. When that figure exceeds $10,000 per enrolled student, the district must additionally state that fact, in plain language, on the first page of its adopted budget, on the front page of its website, and in the notice of every budget hearing, along with the amount by which the threshold was exceeded.
The reasoning appears in the legislative findings: beyond roughly that level, additional per-student spending has not been shown to produce measurable improvement in student outcomes, and the citizens who own the district are entitled to be told plainly when their district has crossed it.
The amendment is equally clear about what the threshold is not. It is a disclosure trigger only. It does not cap, limit, reduce, or condition a district's revenue, its rate, or its budget, and it is not a distribution formula. It is information, delivered to the people who pay for the district, at the moment they are deciding what they think about the budget.
Junior and Community Colleges
Junior college and community college districts are Tier 5 entities and may not be moved into Tier 4. Where a college district's territory is substantially coextensive with a county — which describes most of them — the Transition Board, and later the Monitoring Division, may propose that the county absorb it. That absorption takes effect only if the voters of both jurisdictions approve it. On absorption, the college district's share of the Tier 5 aggregate cap is extinguished, the county assumes its functions, and its outstanding bonds transfer under Section 1-o(g). A college district that can fund itself from tuition, fees, and its own revenues takes no share of the Tier 5 cap at all.
The Transition Board, Transition Fund, and Transition Plan
HJR Sections 1.11, 3.01, and 3.02 → Article VIII, Section 1-u and Article III, Section 49-r and 49-g(r).
How the plan financially backstops all 6,148 taxing entities during the six-year transition — and the constitutional guardrails that keep the $46.6 billion surplus pool from becoming a slush fund.
No system of 6,148 taxing entities can transition from one tax architecture to another without a structural bridge. The Texas Constitution establishes that bridge in two parts: a dedicated Transition Fund placed in Article III, and an independent Transition Board placed in Article VIII, both governed by hard sunset dates that no future Legislature can extend.
Who Actually Qualifies for Help
This is the provision that separates the TPTRP's transition support from an ordinary bailout fund, and it is worth being precise about it.
"A taxing entity is eligible for assistance only if: (1) the entity is imposing its Maximum Available Rate... its voters having approved a rate at the Constitutional Cap Rate applicable to the entity...; (2) the entity's collections at that rate, as certified by the comptroller, remain insufficient to produce the entity's Final Year Baseline; and (3) the entity is in compliance with the Total Budget Cap and Cumulative Budget Growth Cap... the disclosure requirements... and the fund requirements..."
Three conditions, all of them required. The entity has to have gone to its voters and been told yes, all the way to the constitutional maximum. It has to still be short of the baseline at that maximum. And it has to be following the rules. Neither the Board nor the Monitoring Division may waive any of it, and neither may provide assistance "that has the effect of supplying revenue the voters of the entity declined to authorize."
An entity whose voters said no is ineligible, full stop, until its voters say yes.
There is one deliberate exception, and it is the one that makes the whole system work over time. Economic development assistance — the work of building a permanent transaction base in a jurisdiction that does not have one — is available to a compliant entity whether or not it has exhausted its rate. Rate exhaustion gates the money that substitutes for revenue. It does not gate the work of making the entity self-sustaining, because that work is the entire point.
What Happens After the Board Sunsets
The Transition Board terminates on the sixth anniversary of the Implementation Date. What survives it is the TPTRP Transition Monitoring Division inside the comptroller's office, and Section 1-u(h) gives that Division five permanent duties: continuously evaluate every taxing entity's revenue sufficiency; administer assistance, funded by appropriation from the economic stabilization fund, to entities meeting the Assistance Eligibility Standard; deploy economic development programs and financing tools in shortfall jurisdictions to build a permanent tax base; apportion the Tier 5 aggregate cap among overlapping special districts; and evaluate and recommend absorption, annexation, consolidation, or dissolution for an entity that cannot be made self-sustaining.
The subsection closes with a sentence written specifically to prevent a fiscal cliff at year six: "No taxing entity may be left without a remedy under this subsection by reason of the termination of the Board."
Understanding the Surplus
Every entity's actual operating need is its certified I&S obligation plus its M&O budget. The TRO is that actual need multiplied by 1.10 — the 10% above actual need is the structural buffer, surplus by design. The SCR then generates an additional $28.09 billion above the TRO across all entities, for a system-wide total surplus of $46.6 billion above actual operating need.
| Component | System-Wide Amount | Source |
|---|---|---|
| 10% Structural Buffer (surplus by design) | $18,504,963,944 | TRO × 1.10 minus actual need, all entities |
| SCR Surplus Above TRO | $28,090,854,125 | SCR collections minus aggregate TRO |
| Total Surplus Pool (Year 1) | $46,595,818,069 | Combined |
A Constitutionally Dedicated Fund — Not a Budget Line Item
The Transition Fund is created as a special fund in the state treasury, outside general revenue, and constitutionally dedicated under Article VIII, Section 22's dedicated-funds provision. This matters because it forecloses the single most common failure mode in government transition programs: raid by a future budget-writer.
Sec. 49-r(a), Article III. The TPTRP Transition Fund is created as a special fund in the state treasury outside the general revenue fund. The Fund is established to ensure fiscal continuity for taxing entities during the transition from ad valorem taxation to the sales and use tax system established by this constitution. For purposes of Section 22, Article VIII, of this constitution, money in the Fund is dedicated by this constitution.
The constitutional text is explicit and absolute — the Legislature may not appropriate, transfer, lend, sweep, temporarily borrow, or otherwise divert Fund money for any purpose other than what this section expressly authorizes. No money in the Fund may ever be moved to General Revenue, used for cash-flow management, or tapped for emergency deficit coverage. This provision controls over any contrary general law, meaning no future statute can quietly reopen the door.
Sec. 49-r(d), Article III. The Legislature may not appropriate, transfer, lend, sweep, temporarily borrow, or otherwise divert money in the Fund for any purpose other than a purpose expressly authorized by this section. No money in the Fund may be transferred to the general revenue fund or used for cash-flow management, budget execution, certification support, emergency deficit coverage, or any other governmental purpose not expressly authorized by this section. This subsection controls over any contrary general law.
How the Fund Is Capitalized: The Two-Year Capture Window
The Fund draws from a narrow, time-limited set of sources: legislative appropriations for Board operations, surplus collections during the transition window, civil penalties from the bond-portal enforcement provisions, and investment returns and loan repayments on Fund-authorized assistance.
The surplus-capture mechanism runs on a strict calendar:
- Year 1 — Every dollar each entity collects above its Comptroller-certified Final Year Baseline (its actual final-year combined property tax, sales tax, and — for the state — all other tax revenue) flows to the Fund at each quarterly distribution. This baseline is built from certified actual collections only — never budgets, appropriations, or projections — a deliberate citizen protection against a manipulated baseline.
- Year 2 — The Transition Board itself decides, by a formal, published vote at least 90 days before Year 1 closes, whether to continue capturing up to 50% of above-baseline surplus, waive the capture, or apply it selectively by tier. This is the Board's first real discretionary act, and it must be justified with certified Year-1 data, not guesswork.
- Year 3 onward — The capture stops entirely by constitutional command. From this point forward, every dollar of above-baseline surplus flows through the ordinary entity waterfall described in Part 8 — never to the Fund.
Sec. 49-r(b), Article III. The Fund consists of: (1) appropriations made by the Legislature for transition purposes authorized by this section, including appropriations for the operating budgets of the three appointed Board members and their support staffs, as established by general law; (2) surplus collections during the transition period, as determined by general law and subject to the limits of this section: (A) in the first fiscal year after the Implementation Date, all collections above each taxing entity's Comptroller-certified final-year combined property tax and sales tax revenue, and all other Comptroller-certified final-year tax revenue for the State of Texas, shall be transferred to the Fund at each quarterly distribution; (B) in the second fiscal year after the Implementation Date, the Transition Board shall determine, not later than the 90th day before the end of the first fiscal year and based on Comptroller-certified quarterly distribution data from the first three quarters of that year, whether to activate a capture of up to 50 percent of each entity's above-baseline surplus, to waive that capture in whole or in part, or to activate the capture on a tier-selective basis; and (C) beginning with the third fiscal year after the Implementation Date, no collections shall be transferred to the Fund under this subdivision; (3) civil penalties collected under the general laws implementing this section and the related transition-board provisions of this constitution; (4) interest, investment earnings, loan repayments, and all other returns on Fund balances or Fund-authorized assistance; and (5) money transferred or deposited to the credit of the Fund as authorized by general law consistent with this section.
What the Fund Can — and Cannot — Be Used For
Money in the Fund is restricted to four purposes: Board operating expenses, low-interest supplemental loans to entities still short of their Final Year Baseline even at their voter-approved Constitutional Cap Rate, structural self-sufficiency investments that help an entity build a permanent tax base, and the administrative work of closing out the transition itself.
Sec. 49-r(c), Article III. Money in the Fund may be used only for: (1) Board operating expenses authorized by general law; (2) supplemental assistance, including low-interest loans and similar financial assistance authorized by general law, to eligible taxing entities whose voter-approved rate at the Constitutional Cap Rate applicable to the entity's tier remains insufficient to produce the entity's Comptroller-certified Final Year Baseline or other constitutionally authorized operating threshold during the transition period; (3) structural self-sufficiency investments, including development financing and related transition assistance authorized by general law, for eligible taxing entities; and (4) repayment, administration, monitoring, and closeout activities authorized by general law and directly related to the purposes of this section.
Every dollar of assistance must clear a constitutional public-purpose test — it must serve a genuine public benefit, and it must carry repayment terms and reporting controls sufficient to prove that benefit is actually delivered.
Sec. 49-r(e), Article III. Assistance and investments made from the Fund must serve a public purpose, provide a clear public benefit consisting of continuity of essential governmental services and transition to permanent revenue self-sufficiency, and be subject to conditions, limitations, reporting, and repayment controls provided by general law sufficient to ensure that the public purpose is accomplished and the public benefit is protected.
And critically, nothing in this section may weaken the separate constitutional bond guarantees described in Part 6 — the Fund coordinates with bond protection, it never substitutes for it.
Sec. 49-r(f), Article III. Nothing in this section impairs, supersedes, or diminishes any constitutional or contractual protection applicable to bond obligations. The Legislature shall provide by general law for coordination between the Fund and the bond-protection provisions of this constitution. The Transition Board may coordinate assistance to ensure that bond service is properly supported during the transition period, but money in the Fund may not be construed to replace, narrow, or weaken any separate constitutional bond guarantee.
The Transition Board: Three Appointed Officers, Six-Year Term, Hard Sunset
The Board is a temporary independent body of state government, not a permanent agency, established under general law pursuant to this constitutional mandate.
Sec. 1-u(a), Article VIII. The Legislature shall establish by general law a TPTRP Transition Board as a temporary independent body of state government to administer the transition assistance framework established by this constitution and by general law during the period ending on the sixth anniversary of the Implementation Date.
The Board's constitutional authority is broad but bounded. It may approve supplemental assistance to entities that have already gone to their own voters for a rate increase up to their tier's Constitutional Cap Rate and remain short even at that rate — the Board can never set a rate itself, and no rate increase ever takes effect without the affected entity's own voters approving it. Beyond assistance, the Board can advise entities and the Legislature on fiscal sufficiency, pursue federal and state economic-development leverage for shortfall jurisdictions, execute development agreements, and issue administrative rerouting orders for absorbed special districts.
Sec. 1-u(b), Article VIII. The Board has full administrative and executive authority, subject to general law, to: (1) review and approve supplemental assistance from the TPTRP Transition Fund to eligible taxing entities whose tier allocation is insufficient to fund their certified operations during the transition period, subject to the eligibility conditions established by general law, including the requirement that the entity's voters have approved a rate increase up to the Constitutional Cap Rate applicable to that entity's tier and the entity remains below its Comptroller-certified Final Year Baseline or other constitutionally authorized operating threshold at that rate; (2) provide analysis and advisory support to taxing entities and to the Legislature regarding the rates needed for fiscal sufficiency, subject to the principle that no rate change at any tier may be made without action by the governing body of the affected entity and no rate increase may take effect without approval by the voters of that entity's jurisdiction when voter approval is otherwise required by this constitution; (3) identify, coordinate, and leverage available federal and state economic development programs, special-zone designations, and financing tools in eligible shortfall jurisdictions to accelerate commercial economic development and build a permanent sales and use tax base; (4) execute development agreements and deploy transition assistance as authorized by general law and consistent with the public-purpose requirements of this constitution; (5) issue administrative orders for special district tier-rerouting assignments as authorized by general law; (6) coordinate transition assistance with the comptroller, the Bond Review Board, the Texas Education Agency, the Texas Water Development Board, the Texas Commission on Environmental Quality, the governor's economic development office, and other state agencies or programs specified by general law; and (7) take additional actions provided by general law that are necessary to ensure every eligible taxing entity achieves revenue self-sufficiency under the sales and use tax system established by this constitution.
What it categorically cannot do is dissolve, consolidate, annex, or otherwise restructure any taxing entity without that entity's own voters approving it — no modeled or estimated revenue figure, standing alone, is ever constitutional grounds for administrative dissolution.
Sec. 1-u(e), Article VIII. General law may not authorize the Board or any other officer or agency to dissolve, consolidate, annex, absorb, or otherwise alter the governmental structure, territory, or separate legal existence of a taxing entity without the voter approvals otherwise required by this constitution and by general law. No estimated or modeled tax-base determination alone constitutes constitutional grounds for administrative dissolution or consolidation.
The Guardrail Against "No Entity Left Behind" Becoming "No Accountability"
The constitution builds in an explicit citizen protection: no taxing entity may be forced into financial exigency solely because of the transition, so long as it has timely applied for assistance and is cooperating with the Board's restructuring recommendations. This is the flip side of the Board's discretion — it is a constitutional promise that good-faith cooperation during the transition will not be punished with abandonment.
Sec. 1-u(d), Article VIII. No taxing entity in this state may be placed in financial exigency solely as a result of the transition from ad valorem taxation to the sales and use tax system established by this constitution if the entity has timely applied for available transition assistance and is cooperating with lawful restructuring recommendations issued under general law.
The Six-Year Sunset and What Survives It
Both the Fund and the Board terminate no later than the sixth anniversary of the plan's Implementation Date — a fixed constitutional deadline the Legislature cannot extend by ordinary statute. The Board may dissolve earlier, but only by unanimous vote of all three appointed members and only on a certified finding that every entity on its worklist is self-sufficient and every remaining obligation has a designated successor.
Sec. 1-u(g), Article VIII. The Board terminates not later than the sixth anniversary of the Implementation Date and may dissolve before that date only by unanimous vote of all appointed Board members on a finding that all eligible taxing entities are self-sufficient and all lawfully incurred obligations are under active management by a designated successor. The Board's term may not be extended. The Legislature may by general law provide for continued administration of specific obligations lawfully incurred before the Board's termination, but may not continue the Board itself beyond that date.
On termination, any unspent Fund balance transfers to the State's Economic Stabilization Fund — the Stabilization Fund — closing the loop rather than lingering as an off-books account.
Sec. 49-r(g), Article III. The Fund terminates not later than the sixth anniversary of the Implementation Date. On termination of the Fund, any unexpended and unobligated balance remaining in the Fund shall be transferred to the economic stabilization fund under Section 49-g of this article. The Legislature may by general law provide for the administration after that date of specific obligations lawfully incurred before termination, but the Fund itself may not be continued beyond that date.
What does survive permanently is a new division inside the Comptroller's own office: the TPTRP Transition Monitoring Division. This is the one piece of this provision with no expiration date. It absorbs all of the Board's monitoring, reporting, and successor-obligation duties once the Board sunsets, reports to the Legislature and Governor for at least two years afterward, and keeps a permanent, independent set of eyes on entity-level sales and use tax collections long after the Transition Board itself is gone.
Sec. 1-u(h), Article VIII. The comptroller shall establish by general law a permanent TPTRP Transition Monitoring Division within the comptroller's office. The Division shall assume all monitoring, reporting, record-keeping, and successor-administration responsibilities assigned by general law on the Board's termination. The Division director shall be appointed by the comptroller. The Division shall continue to report to the Legislature and the governor for not less than two years following the Board's termination and shall maintain ongoing monitoring of taxing entity sales and use tax collections and successor obligations under this constitution thereafter. This subsection does not expire.
Finally, both Article provisions carry their own sunset clauses that expressly preserve rights and duties already fixed before expiration, so no obligation locked in during the transition simply evaporates when the clock runs out.
Sec. 49-r(h), Article III. This section expires on the sixth anniversary of the Implementation Date, except that: (1) Subsection (g) of this section continues in effect for the limited purpose of completing the transfer required by that subsection and administering specific obligations lawfully incurred before termination as authorized by general law; and (2) the expiration of this section does not affect rights or duties fixed before expiration. Sec. 1-u(i), Article VIII. Subsections (a) through (g) of this section expire on the sixth anniversary of the Implementation Date, except that the expiration of those subsections does not affect rights or duties fixed before expiration. Subsection (h) of this section does not expire.
| Element | Where It Lives | Key Constraint |
|---|---|---|
| Transition Fund | Article III, new §49-__ | Constitutionally dedicated; no diversion to General Revenue; 6-year sunset |
| Transition Board | Article VIII, new §1-__ | 3 appointed officers; voter approval required for any rate action or restructuring |
| Transition Monitoring Division | Article VIII, new §1-__(h) | Permanent; does not expire; assumes Board's duties on sunset |
| Fund termination | Article III, new §49-__(g) | Residual balance transfers to the Economic Stabilization Fund |
Year-1 Shortfall Protocol — Mid-Cycle Rate Elections During Transition
If mid-year collection data shows an entity genuinely tracking below its certified M&O need after the first two quarterly distributions, the entity may immediately initiate a voter-approved M&O rate increase election rather than waiting for year-end remediation. Only the M&O rate component may be addressed; the I&S rate is not subject to mid-cycle adjustment. If voters approve, the new rate takes effect at the start of the next full quarterly distribution period. If voters reject, the budget reduction protocol applies and Transition Fund support remains available for essential services. The Transition Board is notified of all Year-1 mid-cycle election proposals within 10 days of the governing body's vote to submit.
The Fund System and Surplus Waterfall
How every surplus dollar flows through five constitutionally protected funds — and how those funds protect citizens, infrastructure, and first responders before surplus is returned as a Citizen Dividend.
Under the TPTRP, every taxing entity — the State, every county, city, ISD, and every special district in the tier structure — operates the same five-fund architecture:
- A Stabilization Fund for revenue shortfalls and disaster response
- An I&S Reserve Fund for bond debt service (established in Part 6)
- An Infrastructure Fund for Qualifying Infrastructure
- A First Responder Fund for police, fire, EMS, and emergency departments
- A Citizen Dividend Fund for returning surplus to citizens on an equal per-capita basis
The new TPTRP Fund System article in the constitution does three things: (1) defines each fund’s purpose and legal restrictions, (2) mandates minimum and maximum reserve levels, and (3) embeds the Surplus Waterfall as the only constitutionally permitted sequence by which surplus revenue flows into and through these funds.
The Funds Defined — One Architecture for All Entities
The Fund System article starts with definitions. In plain language:
- A “taxing entity” is the State, any county, any city, any ISD, and any special district that receives TPTRP sales and use tax revenue.
- “Full Budget Funding Amount” is the entity’s most recently adopted annual M&O budget plus its certified annual I&S bond debt service.
- The “Six-Month Minimum Balance” is 50% of that amount; the “One-Year Maximum Balance” is 100% of it.
Every entity is constitutionally required to have:
- A Stabilization Fund — its general fiscal reserve, separate from all other funds, and never commingled with M&O or I&S operating accounts. For the State, the existing Economic Stabilization Fund (ESF) is redesignated as the State’s Stabilization Fund.
- An Infrastructure Fund — a purpose-restricted fund used only for “Qualifying Infrastructure” (water, wastewater, electric, roads and bridges, flood control, and other public capital assets defined by the article).
- A First Responder Fund — a purpose-restricted fund used only for capital, equipment, training, and emergency-event cost recovery for First Responder Departments (police, fire, EMS, emergency management).
- An I&S Reserve Fund — the single dual-function bond fund explained in Part 6: it is both the operating account from which bond payments are made and the entity’s first-line emergency reserve for bond shortfalls. No separate bond reserve fund is permitted; this one fund does it all.
- A Citizen Dividend Fund — the fund into which the guaranteed minimum share of surplus flows before per-capita distribution to citizens.
None of these funds is part of the entity’s general fund. Each is legally segregated, purpose-locked, and subject to personal liability for any official who misuses it.
The Stabilization Fund — Six-Month Minimum, One-Year Maximum
The Stabilization Fund is the backbone of local and state fiscal resilience. Its rules are:
- Minimum balance: Every entity must maintain its Stabilization Fund at or above its Six-Month Minimum Balance — six months of full budget (M&O + I&S). Falling below that threshold automatically triggers a Fiscal Distress Condition.
- Maximum balance: No entity may let its Stabilization Fund exceed the One-Year Maximum Balance — one full year of full budget. Any amount that would push the fund above that level must pass through to the next level of the waterfall.
- Retention and investment: Unused amounts never lapse, never sweep back to the general fund, and may be invested under conservative public-funds standards. All interest earnings stay in the Stabilization Fund, compounding over time.
This applies equally to the State ESF, which is recertified under the same six-month / one-year standard. Counties, cities, ISDs, and special districts keep their existing fund structures (county road and bridge funds, municipal debt service funds, ISD PEIMS codes), but the Stabilization Fund is added as a new, separate reserve layer, not a replacement.
Capitalizing the Stabilization Fund — Level 1 of the Waterfall
Level 1 of the Surplus Waterfall is constitutionally reserved for the Stabilization Fund. The Fund System article makes this the primary capitalization mechanism:
- Up to 50% of the entity’s distributable surplus for the fiscal period may be contributed to the Stabilization Fund at Level 1.
- During the Accumulation Period (before the Six-Month Minimum is reached), this Level 1 share must be used to build the fund; it cannot be diverted to any other use.
- After the Six-Month Minimum is reached, the governing body may, by recorded vote with the CFO’s written recommendation, elect to continue contributing some or all of the Level 1 share until the fund reaches the One-Year Maximum.
- Any portion of the Level 1 share not contributed — either because the fund is at its maximum or because the governing body chooses not to add more that year — passes automatically to Level 2.
No entity may ever contribute more than 50% of its surplus to the Stabilization Fund in a single fiscal period. Direct appropriations, Transition Fund support during the Transition Period, investment earnings, and lawful gifts can also capitalise the fund, but bond proceeds are explicitly prohibited.
Stabilization Fund Uses — Shortfalls, Disasters, and Distress
The Stabilization Fund can only be used for:
- Revenue shortfall coverage — when M&O collections for the period are insufficient to fund the adopted M&O budget plus the 5% operating buffer. This requires a CFO certification, a governing body resolution, and a filing with the Comptroller.
- Declared disaster response — as part of the tiered disaster cascade described below, and only in a strict priority order (essential utilities; health and safety; public infrastructure; then citizen property and local business recovery).
- Fiscal distress recovery — when a Fiscal Distress Condition has been declared due to the fund falling below 50% of the Six-Month Minimum.
- Limited temporary bond coverage — in extraordinary circumstances, to bridge a short-term I&S shortfall, subject to strict repayment and floor requirements and reported to the Comptroller and Bond Review Board.
The Fund System article is equally explicit about prohibited uses: the Stabilization Fund cannot be used for routine operating expenses in a normal year, elective capital projects outside of disaster response, compensation for elected officials, covering deficits caused by violating the Total Budget Cap, serving as collateral for borrowing, substituting for waterfall distributions to other funds, or avoiding a required mandatory expenditure reduction. Officials who authorize prohibited uses face personal liability and enforcement action.
The Tiered Disaster Cascade — Four Tiers, One Priority Order
When a Declared Disaster occurs, the constitutional tiered cascade controls how Stabilization, Infrastructure, and First Responder funds are deployed:
- Tier 1 — Cities and ISDs: City and ISD Stabilization Funds are drawn first; their First Responder and Infrastructure Funds are available concurrently for response in those jurisdictions. A disaster that can be fully resolved at this level must not escalate further.
- Tier 2 — Counties: When any city or ISD in a county draws its Stabilization Fund down to or below 50% of its Six-Month Minimum, the county’s Stabilization Fund activates. The county may assist affected cities/ISDs and fund county-level response.
- Tier 3 — State ESF: When any county’s Stabilization Fund falls to or below 50% of its Six-Month Minimum, the State ESF activates. The Governor may authorize ESF draws for state agency response and financial assistance to affected local entities, subject to Article III, Section 49-g.
- Tier 4 — Catastrophic risk transfer: Once the State ESF is drawn down to or below 50% of its Six-Month Minimum, state catastrophic insurance, reinsurance, and federal disaster assistance mechanisms become the next layer of protection.
At every tier, disaster spending must follow a constitutional priority sequence:
- Restore essential utilities (water, wastewater, electric, gas, communications)
- Protect health and safety (medical response, shelter, food and water, public health)
- Repair public infrastructure (roads, bridges, public facilities)
- Assist citizen property and local business recovery to reduce reliance on private insurance and federal aid
Unused amounts remain in their own funds, invested; they are not swept away simply because a disaster occurred.
Fiscal Distress and Good Faith Contribution — Protecting Entities That Do It Right
A Fiscal Distress Condition is declared automatically when an entity’s Stabilization Fund falls below 50% of its Six-Month Minimum — except during the Accumulation Period, where the Good Faith Contribution Safe Harbor applies.
During Accumulation:
- A Contribution Shortfall (a year with no surplus to deposit at Level 1 despite full compliance with the Total Budget Cap) does not immediately trigger distress.
- The entity instead receives technical assistance from the Transition Board or the Comptroller on the first shortfall.
- Distress is declared only after a second consecutive shortfall or a finding that the shortfall was caused by noncompliance (not genuine economic conditions).
Once Fiscal Distress is declared:
- The governing body must file a Fiscal Recovery Plan within 60 days — specifying the causes, concrete steps to restore the fund to its minimum, timelines (no step deferred beyond 24 months without documented hardship), and any requested assistance.
- The entity’s waterfall distributions are suspended and escrowed by the Comptroller until the plan is certified and the entity demonstrates progress on its milestones.
- During distress, no new non-essential spending, positions, or projects may be approved.
- If distress is not resolved within one fiscal year, the Comptroller may appoint a fiscal manager, after a due-process sequence (notice, response, determination, and expedited judicial review), to oversee recovery while the elected governing body remains in office.
Level 2 — The I&S Reserve Fund
Level 2 of the waterfall is where surplus flows to bond protection. Rather than creating a separate bond reserve fund, the Fund System article cross-references Article VIII, Section 1-o and uses the I&S Reserve Fund as the sole entity- level bond reserve:
- Surplus arriving at Level 2 is directed into the entity’s I&S Reserve Fund — the same single dual-function account that Part 6 already established.
- The I&S Reserve Fund must be maintained between one and two times annual bond debt service; excess above two times automatically triggers an I&S Rate reduction.
- Level 2 surplus can only be used for bond debt service and emergency bond shortfall coverage under the cascade; it cannot be redirected to any other purpose.
This design prevents over-accumulation and ensures that bondholders are protected first, while excess eventually flows down to citizens via rate reductions and Level 4.
Level 3 — Infrastructure and First Responder Funds
Level 3 splits the remaining surplus three ways:
- A guaranteed 5% into the Citizen Dividend Fund — from Day 1, every entity must send at least five cents of every surplus dollar to citizens.
- A 45% share into the Infrastructure Fund — to be used only for Qualifying Infrastructure (water, wastewater, electric, roads, bridges, flood control, public facilities), with unused amounts carrying forward.
- A 45% share into the First Responder Fund — to be used only for capital, equipment, training, and emergency cost recovery for police, fire, EMS, and emergency management departments.
Infrastructure and First Responder Funds are fully purpose-locked. They are legally segregated, may not be commingled with general funds, and cannot be used for routine payroll or discretionary projects outside their defined scope. Any portion of their Level 3 allocations that the governing body determines, on the public record, is not needed for those purposes in a given year flows down to Level 4 — the Citizen Dividend Fund.
Level 4 — The Citizen Dividend Fund
Level 4 is where the waterfall ends — with citizens.
The Citizen Dividend Fund receives:
- The guaranteed 5% share from Level 3, every fiscal period, and
- All unused Infrastructure and First Responder allocations that were not needed at Level 3.
At the close of each fiscal period, the Citizen Dividend Fund is distributed in equal per-capita shares to every qualifying citizen of the entity. Minor children's shares are set aside in custodian accounts until age 18; parents and guardians have no access to those funds for any purpose.
The amendment defines who qualifies, and it does so tightly:
"[A] 'qualifying citizen' of a taxing entity is a natural person who, as of the date of distribution: (A) is a citizen of the United States; (B) is a citizen and resident of the State of Texas; (C) has resided within the jurisdiction of the taxing entity continuously for not less than one year immediately preceding that date; and (D) is 18 years of age or older... A person who is not a citizen of the United States is not a qualifying citizen and may not receive a distribution under this Section by any means, in any amount, or through any other person."
Four requirements: United States citizenship, Texas citizenship and residency, one year of continuous residence in the jurisdiction, and adulthood — with minors qualifying for a custodial share on the same citizenship and residency terms. The one-year residency requirement ties the dividend to the community that generated the surplus. The citizenship requirement is absolute and is written to foreclose indirect receipt through another person. Verification is required, and the Legislature must make it something a qualifying citizen can satisfy at no cost — the verification is a check on eligibility, not a fee or a hurdle placed between a Texan and money that is already theirs.
The constitution characterizes the Citizen Dividend explicitly as a return of surplus taxes already paid — not a benefit, not welfare, not a grant. No means testing, no applications, no eligibility hoops. This characterization is chosen to align with existing federal treatment of similar refund mechanisms (like Colorado’s TABOR refunds) and to keep the Citizen Dividend out of the “program” category entirely.
Distribution method and statement:
- Citizens may elect to receive their dividend as direct deposit or as a check — with no processing fee permitted.
- With each distribution, the entity must issue a Citizen Distribution Statement — a concise, highly visible report listing the citizen’s exact dividend amount; the breakdown by entity and tier; the entity’s total collections, actual need, and surplus; the rate in effect; and the governing body’s votes at each waterfall decision point.
This statement is designed to be the most politically visible document in the TPTRP system — a yearly, citizen-facing audit of how surplus was handled and how much was returned.
Special Districts and the Waterfall
HJR Sections 1.03, 1.04, and 1.10 → Article VIII, Section 1-m(a)(2), 1-n(b)(4), and 1-t(g).
Texas has over 3,000 special purpose districts. Under the TPTRP, special districts are addressed through a purpose-matched waterfall framework, aligned with their mission and constitutional fund definitions.
The Fund System article does not treat special districts as an afterthought — it explicitly seats them in Tier 5 and requires them to operate the same Stabilization, Infrastructure, First Responder, I&S Reserve, and Citizen Dividend Funds as every other entity, with mission-specific tailoring:
| District Type | Examples | Level 3 — First Responder 45% | Level 3 — Infrastructure 45% |
|---|---|---|---|
| First Responder Function | Emergency Services Districts (ESDs) | Full 45% applies to primary service mission | Full 45% applies |
| Infrastructure Function | MUDs, WCIDs, River Authorities, Flood Control | Redirects to Infrastructure Fund | Full 45% applies |
| Service Mission Function | Hospital Districts, Community Colleges, Libraries | Redirects to Stabilization Fund (to 1-yr max), then Citizen Dividend | Covers facilities & service delivery capital |
| Proposed for Absorption | Redundant/small districts in consolidation | Waterfall balances transfer to absorbing entity on absorption date |
Emergency services districts use the First Responder Fund as their primary Level 3 destination; water and utility districts route surplus into Infrastructure; service-mission districts (hospitals, community colleges, libraries) prioritize Stabilization and then citizen dividends.
Who Is Actually in Tier 5
The amendment does not leave membership to inference. Section 1-m(a)(2) defines a Tier 5 entity as any special district, authority, corporation, or other political subdivision of this state, "however created and by whatever name," that in its final year levied an ad valorem tax, imposed a local sales tax, or received a dedicated share of either — and that is not the State, a county, a city, or a school district. The definition names the classes explicitly: municipal utility districts, water control and improvement districts, fresh water supply districts, drainage and levee districts, groundwater conservation districts, river authorities, hospital districts, emergency services districts, jail districts, airport authorities, junior and community college districts, library districts, metropolitan and regional transit authorities, crime control and prevention districts, county assistance districts, municipal development districts, and Type A and Type B economic development corporations.
The closing sentence matters as much as the list: an entity meeting the test is a Tier 5 entity "whether or not the Legislature has separately classified it." There is no gap for a district to fall through, and no discretion for a future legislature to place a favored district outside the structure.
The 0.50% Is Shared, Not Multiplied
Special districts are the only class whose jurisdictions routinely overlap each other, so the Tier 5 cap is an aggregate rather than a per-entity limit. Every Tier 5 district serving a given address divides one-half of one percent between them. The Transition Board apportions it by administrative order based on each district's certified obligations, and the Transition Monitoring Division holds that function permanently after the Board sunsets.
This is the provision that finally does something about Texas's 3,000-plus special districts. The apportionment forces an answer to a question no one has been required to answer before: what does this district actually need, measured against every other district serving the same taxpayers? Three outcomes follow from it.
- A district that no longer needs a tax gets none. If a hospital district's operating revenues cover its obligations, Section 1-n(b)(5) reduces its share accordingly, and it becomes a candidate for absorption or dissolution.
- A district that duplicates another can be absorbed. The Board evaluates and may propose absorption, consolidation, or dissolution, with the voters of both jurisdictions approving and the bond-absorption and CCR-certification rules of Section 1-o(g) governing the transfer. No entity's rate may breach its Constitutional Cap Rate as a result.
- A new district cannot simply be added. A district created after the Implementation Date starts at a zero rate, may first ask its voters for no more than half of the available share, and cannot impose anything at all until the Division reapportions the cap — which means an existing district has to give something up first.
Bonds Secured by District Sales Taxes
Many Tier 5 entities — transit authorities above all — carry debt pledged against a local sales tax rather than a property tax. Section 1-o(g-1) treats that debt exactly like ad valorem-backed debt: it is a Pre-Abolition Bond, guaranteed by the State, serviced from the district's Bond Service Levy, with access to the I&S Reserve Fund and the shortfall cascade, and requiring no new election or covenant amendment. A transit authority's bondholders are in the same protected position as a school district's.
Government as Your Enterprise: Performance, Accountability, and Dividends
Implements the legislative findings that establish every taxing entity as a citizen-owned enterprise, the seven performance criteria, and the Citizen Dividend as the measurable performance metric.
The TPTRP is built on a foundational principle that most government structures resist acknowledging: every taxing entity is a citizen-owned enterprise. The citizens are the owners. The elected officials are the management. The governing body's job is to operate the enterprise at the highest possible performance standard, within its revenue, in service of its owners. When it does that well, the owners receive a return on their investment. That return is the Citizen Dividend.
This is not a metaphor. It is the structural reality of what the TPTRP creates. Under the current property tax system, the relationship is inverted: government sets a levy, citizens pay it or face the loss of their homes, and there is no mechanism by which efficient management returns value to citizens. The TPTRP reverses that relationship constitutionally.
The Seven Performance Criteria
The TPTRP's implementing legislation includes a declaration of governing principles for every taxing entity — the seven criteria by which citizens are expected to evaluate their government's performance. These are not aspirational goals; they are the functional definition of what a well-run taxing entity does with its citizens' money:
| # | Performance Criterion | How the TPTRP Measures It |
|---|---|---|
| 1 | Protection from crime — Public Safety | First Responder Fund growth; police and fire capacity; crime rate trends in the entity's jurisdiction |
| 2 | Access to the means of justice | Court and legal services funding in the annual budget; response time to civil and criminal process |
| 3 | Economic security of citizens | Revenue growth without rate increase (economic activity growth); business creation and retention metrics |
| 4 | Proper enforcement of the laws | First Responder Fund deployment; compliance with constitutional mandates; citizen enforcement actions filed |
| 5 | Safety and security of citizens — First Responders | First Responder Fund balance and deployment; response times; staffing and equipment levels |
| 6 | Infrastructure sustained for life in the jurisdiction | Infrastructure Fund balance and project pipeline; Capital Improvement Plan maintenance; deferred maintenance ratio |
| 7 | Fiscal discipline — doing all of the above within revenues | Actual Need Ratio; Cumulative Budget Growth Cap compliance; Citizen Dividend amount per capita |
The seventh criterion — fiscal discipline — is the most visible to citizens, because its output is the Citizen Dividend. The bigger the dividend, the better the government performed. A governing body that grows its budget to consume all surplus, neglects infrastructure to pad administrative accounts, or allows the First Responder Fund to run dry while expanding bureaucracy will pay a small or zero dividend — and citizens will know exactly why, because the financial officer's advisement and every governing body vote is on the public record.
Revenue Grows Only When the Economy Grows
Because the TPTRP rate is applied to economic transactions rather than property values, a taxing entity cannot collect more money simply because appraised values went up. Revenue grows only when businesses are created, jobs are added, and commerce increases in the jurisdiction. This creates a structurally direct relationship between policy decisions and outcomes that the property tax system entirely lacks: cities must actively pursue business attraction, retention, and job creation because those activities are the only mechanism by which their allocated revenue expands. Good governance is financially rewarded. Stagnation and poor management are financially punished — automatically.
Your Right to Enforce These Protections
Implements the citizen enforcement and standing provisions that run through every section of this Article, with fee-shifting in favor of prevailing citizen plaintiffs.
Every protection in this plan is enforceable by any Texas citizen — directly in court, with attorney's fees if you win. The protections in this plan are not dependent on any government official choosing to act. Every Texas citizen has the right to enforce them directly in court.
Citizen Enforcement Standing
Any adult Texas citizen who resides in or pays taxes in a jurisdiction governed by a TPTRP taxing entity has standing to bring a civil action in the district court of the county where the entity is located to:
- Compel a governing body to reduce its rate when the Unified Rate Reduction Rule has been triggered and the entity has failed to act
- Enjoin a governing body from imposing a mandatory fee or charge that constitutes a functional tax increase without voter approval
- Compel publication of any report, notice, or document required under this plan that has not been timely filed
- Challenge a Comptroller certification or failure to certify where the citizen has evidence of error
- Challenge any bond placement that was not preceded by the required Citizens First offering period — and seek to void that placement
- Seek any other relief necessary to enforce the constitutional protections established by this Article
The court shall expedite hearings on TPTRP enforcement actions. If the citizen prevails, the court shall award reasonable attorney's fees and court costs against the entity. If the action is found to be frivolous, the court may award fees to the entity. This right of enforcement exists independently of — and in addition to — any enforcement authority held by the Texas Comptroller.
``legal Every citizen of Texas shall have standing to bring an original action in district court to enforce any provision of this Article. Courts shall expedite hearings on such actions and shall award attorney's fees and costs to a prevailing citizen plaintiff. No entity of government may by ordinance, contract, or other instrument abridge this right of enforcement. ``
What Else the Amendment Changes: Conforming Amendments and Repeals
Implements HJR Articles 2 through 8 — conforming amendments and repeals across Articles III, VII, VIII, IX, XI, and XVI.
Property tax authority, and the dedicated-revenue provisions built on top of it, are threaded through seven different articles of the Texas Constitution — funding highways, schools, hospital districts, cities, water districts, and the state's own debt limit. Articles 2 through 8 of the HJR re-key every one of those provisions from a property-value base to a sales-and-use-tax base, then repeal what no longer applies. This part covers that work in the order the HJR presents it.
Article 2 — Conforming the Dedicated-Revenue Provisions of Article VIII
Texas dedicates several existing tax streams to specific purposes by name — motor fuel taxes to roads and schools, the motor vehicle sales tax to the state highway fund, and narrower dedications for sporting goods and water. Because the HJR abolishes the underlying taxes that fund those dedications, Article 2 rewrites each dedication so the same purpose is funded from the sales and use tax collected on the same transactions, rather than from a tax that no longer exists.
Roadway dedication and the Available School Fund one-fourth share. HJR Section 2.01 → Article VIII, Section 7-a keeps the historic arrangement under which motor fuel and lubricant taxes fund public roadways, with one-fourth of that revenue going to the Available School Fund. It simply moves the funding source:
"Beginning on that date, the net revenue derived from the sales and use tax imposed on the sale of motor fuels and lubricants used to propel motor vehicles over public roadways is dedicated by this constitution to the purposes stated in this section, in place of the abolished taxes, and one-fourth of that net revenue shall be allocated to the Available School Fund exactly as the one-fourth allocation of motor fuel tax revenue was allocated before that date."
The dedication keeps the same bond-payment priority the old fuel tax carried, with the added protection of the Section 1-o guarantee. Motor vehicle registration fees are unaffected — they are fees, not taxes.
State highway fund, sporting goods, and Texas Water Fund. HJR Section 2.02 → Article VIII, Sections 7-c, 7-d, and 7-e make the same substitution for three more dedications. The state highway fund deposit under Section 7-c is now made from Tier 1 sales and use tax revenue on transactions formerly taxed as motor vehicle sales, with the Comptroller required to recompute dollar thresholds so the fund receives "substantially equivalent" proportional funding. The sporting goods dedication under Section 7-d is sourced from sales and use tax on the same sporting goods formerly taxable, and the Texas Water Fund dedication under Section 7-e is sourced from Tier 1 revenue, both under the same equivalence-recomputation rule. Each dedicated amount is carved out before the entity's ordinary waterfall runs, so it does not compete with general surplus.
The general rule — Section 2.02(e). Rather than leaving every other statutory dedication to be individually rewritten, the HJR states a general conforming rule that covers all of them at once:
"Each state tax abolished by Section 1-m(c) of this article that is dedicated by general law to a particular fund, agency, or purpose continues to fund that same fund, agency, or purpose on and after the Implementation Date, from the net revenue derived from the sales and use tax imposed on the transactions formerly subject to the abolished tax."
This is a default rule, not a new constitutional dedication — the Legislature keeps the same authority to modify a statutory dedication it had before. Article 2 closes with Section 2.03, subjecting state appropriations from Tier 1 revenue to the same Total Budget Cap and Cumulative Budget Growth Cap governing the rest of the tiered rate structure, and confirming the prior property-value appropriations-growth limit no longer applies.
Article 3 — Conforming Article III: State Funds, State Debt, and Special Districts
Article III of the Texas Constitution houses the state's general legislative powers, including its dedicated funds and debt limit. Article 3 of the HJR amends several of these provisions to fit the new tax structure.
The TPTRP Transition Fund. HJR Section 3.01 → Article III, Section 49-r creates the Transition Fund as a special fund outside general revenue, dedicated under the Article VIII, Section 22 rule, to finance the transition described in Part 12. It is capitalized in Year 1 by capturing every dollar an entity collects above its certified Final Year Baseline, tapered in Year 2, and cut off entirely from Year 3 forward, and terminates no later than the sixth anniversary of the Implementation Date, with any unspent balance transferring to the Economic Stabilization Fund.
The Economic Stabilization Fund, and the end of oil and gas severance transfers. HJR Section 3.02 → Article III, Section 49-g(r) designates the existing Economic Stabilization Fund as the Stabilization Fund for all purposes of the TPTRP fund system and surplus waterfall, and sets its minimum and maximum balances by reference to the state's Full Budget Funding Amount. Because oil, gas, and condensate production taxes are abolished, the fund can no longer be capitalized by a transfer of severance tax revenue, and the HJR ends that mechanism directly:
"the oil and gas production tax transfer mechanism established by Subsections (b) through (e) of this section ceases to operate on the Implementation Date, the taxes on the production of oil, gas, and condensate having been abolished by Article VIII, Section 1-m(c) of this Constitution."
In its place, the fund is capitalized from Level 1 of the surplus waterfall, direct legislative appropriation, the biennium transfer of unencumbered general revenue balances, and investment earnings; a transfer made before the Implementation Date is unaffected. Section 8.01(b-1) separately repeals the old severance-transfer subsections outright, since Section 49-g(r) has superseded them.
The state debt limit. HJR Section 3.03 → Article III, Section 49-j(e)-(f) makes two clarifications. First, the Bond Service Levy collected under Section 1-o is treated as a dedicated fund for the debt-limit ratio, so the state's guarantee of pre-existing bonds does not eat into its capacity to issue new, voter-approved state bonds. Second, it restates — inside Article III — that the state may not issue new debt without a statewide voter majority, the same requirement Section 1-n(i) of Article VIII already imposes.
Special district and road district taxing authority. HJR Section 3.04 touches five separate Article III sections governing districts that currently rely on ad valorem taxation:
| HJR provision | Constitutional section | District type | What changes |
|---|---|---|---|
| Sec. 3.04(a) | Art. III, Sec. 48-e | Emergency services districts | Ad valorem ends; becomes Tier 5, funded from Tier 5 allocation |
| Sec. 3.04(b) | Art. III, Sec. 48-f | Jail districts | Ad valorem ends; becomes Tier 5, funded from Tier 5 allocation |
| Sec. 3.04(c) | Art. III, Sec. 52d | County/road district road-and-bridge tax | Annual tax ends; funded from county Tier 2 allocation and Infrastructure Fund |
| Sec. 3.04(d) | Art. III, Sec. 52, 52k | County and district bond authority | New obligations follow Section 1-o and voter approval, not ad valorem taxes |
| Sec. 3.04(e) | Art. III, Sec. 52-a | Development loans and grants | Cannot be funded/secured by ad valorem tax; TIF terminates on Implementation Date |
In each case, an obligation already outstanding on the Implementation Date remains valid and continues to be paid under the Section 1-o bond guarantee — only new authority to tax by value is closed off. Under Section 3.04(e), a tax increment pledge already relied on for an outstanding bond is separately protected as a Pre-Abolition Bond.
Article 4 — Conforming Article VII: Public Free Schools
Article 4 of the HJR rewrites the constitutional foundation of Texas school finance, replacing property-value-based funding with the Tier 4 sales and use tax mechanism described in earlier parts of this article.
Redefining the efficient system of public free schools. HJR Section 4.01 → Article VII, Section 1 keeps the constitution's original mandate — that the Legislature maintain "an efficient system of public free schools" — but redefines what satisfies it. Efficiency now means every district gets access to the same uniform maximum rate, plus a guaranteed funding floor delivered through the transition and assistance framework, rather than equal revenue per student or equal tax effort:
"The efficiency required by this section is measured by equal access to a uniform maximum rate and by the guaranteed sufficiency of funding for the general diffusion of knowledge, and is not measured by equality of taxable transaction base, of collections per student, or of expenditures per student among districts."
The same section forecloses the traditional judicial remedy for school-finance inequity: "No court may order, and the Legislature may not enact, a remedy under this section that requires one school district to remit any portion of its collections to the State, to another district, or to any equalization or redistribution fund." A district whose voters decline a rate increase is not entitled to assistance.
School district taxation. HJR Section 4.02 → Article VII, Section 3 retires the old one-fourth-of-occupation-taxes formula and bars any school district from levying an ad valorem tax on or after the Implementation Date. HJR Section 4.03 → Article VII, Section 3(e) fills in the mechanism: Tier 4 sales and use tax collections fund each district's maintenance, operations, and bond debt service, each district sets its own rate, and the Comptroller remits collections sourced to that district directly. "No distribution to a district may be based on student enrollment, attendance, or property wealth" — the Foundation School Program and recapture ("Robin Hood") system are gone.
Junior and community colleges, including the county absorption path. HJR Section 4.04 → Article VII, Section 3-b bars ad valorem taxation by any independent school district or junior college district and classifies junior and community college districts as Tier 5 entities. Where a junior college district's territory is substantially coextensive with a county's, the Transition Board — and after its sunset, the Transition Monitoring Division — may propose absorbing the district into the county, on approval by a majority of qualified voters in both jurisdictions. On absorption, the district's Tier 5 cap share is extinguished, the county takes over its functions, and its obligations transfer to the county under standard bond-servicing rules. A college funded from tuition and fees, rather than tax collections, takes no share of the Tier 5 cap.
Permanent School Fund bond guarantee. HJR Section 4.05 → Article VII, Section 5(h)-(i) preserves the Permanent School Fund's existing guarantee of school district bonds intact, substituting the Bond Service Levy as the revenue source behind it, with the state's own guarantee under Section 1-o(b)(5) acting as a secondary backstop only if a PSF draw falls short. For open-enrollment charter schools, which are not taxing entities and collect no levy of their own, the HJR builds an automatic co-guarantee:
"Upon any draw on the PSF guarantee by a charter school bondholder, the State of Texas simultaneously co-guarantees the same payment obligation through the Bond Service Levy and the State Economic Stabilization Fund under Article III, Section 49-g. The co-guarantee is automatic and self-executing."
Article 5 — Conforming Article XI: Cities
HJR Section 5.01 → Article XI, Section 4 ends ad valorem taxation by cities and towns of 5,000 or fewer inhabitants, reclassifying them as Tier 3 entities capped at the Tier 3 Constitutional Cap Rate. HJR Section 5.02 → Article XI, Section 5 does the same for home-rule cities, adding a requirement that every home-rule city get voter approval before issuing new debt and comply with the full Citizens First Bond Sale Requirement — closing off any argument that a home-rule charter's independent debt authority survives the amendment. HJR Section 5.03 → Article XI, Section 7 ends ad valorem taxation for coastal county and city sea wall, breakwater, and sanitation projects, funding them instead from the entity's Infrastructure Fund, its Tier 2 or Tier 3 allocation, and properly-issued bonds.
Article 6 — Conforming Article IX: Hospital Districts and Airport Authorities
HJR Section 6.01 → Article IX, Section 4, 5, 8, 9, and 11 end ad valorem taxation for hospital districts, reclassify them as Tier 5 entities, and specifically preserve the district's underlying obligation to furnish medical care to indigent and needy residents — the funding mechanism changes, the duty does not. The same section, at Section 12, ends ad valorem taxation for airport authorities on the same terms, and at Section 13, bars any political subdivision from funding its participation in a district or authority through an ad valorem tax. Bonds outstanding on the Implementation Date remain valid and continue to be paid under the Section 1-o guarantee.
Article 7 — Conforming Article XVI: Conservation and Reclamation Districts, and the County Assessor-Collector
Conservation and reclamation districts. HJR Section 7.01 → Article XVI, Section 59 ends ad valorem taxing authority for the full range of conservation and reclamation districts — municipal utility districts, water control and improvement districts, fresh water supply districts, drainage and levee improvement districts, groundwater conservation districts, and river authorities — and reclassifies them as Tier 5 entities. A point the HJR takes care to make explicit is that this does not touch a district's ability to charge for actual service delivered:
"a district described by Subdivision (1) of this subsection may continue to charge and collect rates, fees, and charges for the actual, metered, or contracted delivery of water, wastewater, drainage, or other utility service furnished to a customer. Such a rate, fee, or charge is a charge for a specific, voluntarily used service and is not a prohibited circumvention under Section 1-m(e) of that article... Such a rate, fee, or charge is also not a tax prohibited by Section 1-m(b)(3) of that article."
A metered water bill is payment for a service you used, not a disguised tax, and the amendment says so directly rather than leaving it to future litigation.
The county assessor-collector. HJR Section 7.02 → Article XVI, Sections 61 and 65 (and Article III, Section 20) keeps existing constitutional references to the county assessor-collector alive only "for so long as that office continues in existence" under the wind-down schedule in Section 9.03 — discussed in Part 12 — after which the Legislature must transfer the office's remaining functions, including motor vehicle registration and title work, to another county officer. More broadly, Section 7.02(c) provides that any constitutional provision conditioned on the assessment or collection of taxes on a property valuation simply stops applying after the Implementation Date, except as needed to finish collecting a tax that was already lawfully assessed.
Article 8 — The Repealer
The conforming amendments in Articles 2 through 7 rewrite what survives. Article 8 removes what does not. HJR Section 8.01 repeals 33 enumerated provisions of Article VIII, plus one provision of Article VII and two related provisions of Article III and Article VIII, on the theory that once the tax they govern no longer exists, the provision governing it has nothing left to operate on. HJR Section 8.02 then adds a general repealer to catch anything the enumerated list missed.
The 33 Article VIII provisions fall into recognizable families:
| Category | Examples (Article VIII sections) |
|---|---|
| Homestead exemptions and elderly/disabled limitations | Sec. 1(d)-(j), (n); Sec. 1-b |
| Agricultural and open-space valuation | Sec. 1-d; Sec. 1-d-1; Sec. 19; Sec. 19a |
| Freeport and goods-in-transit | Sec. 1-j; Sec. 1-n (goods-in-transit) |
| Other targeted exemptions (low-income housing, pollution control, precious metals, animal feed, raw cocoa/coffee, business personal property, improvement value) | Sec. 1-k, 1-l, 1-n (cocoa/coffee), 1-p, 1-s, 1-x, 1-y |
| Appraisal, equalization, and appraisal districts | Sec. 18; Sec. 23 (statewide appraisal prohibition) |
| Tax liens and tax sales | Sec. 13; Sec. 15 |
| County and city rate caps; assessor-collector; place of assessment | Sec. 9; Sec. 11; Sec. 14 |
| Notice-and-hearing rollback provisions | Sec. 21 |
| Railroad property assessment | Sec. 8 |
| Rural economic development and increase limitations | Sec. 1-f, 1-g, 1-h, 1-i, 1-o, 1-r |
Each becomes inoperative for the same reason: it is a rule about how to exempt, value, appraise, cap, or collect a tax measured by property value, and once Section 1-e abolishes that tax, there is nothing left to govern. Outside Article VIII, the repealer also removes Article VII, Section 6b (county permanent school fund ad valorem tax reduction), the oil-and-gas severance transfer subsections of Article III, Section 49-g, and the property-tax portion of Article VIII, Section 2(b) — while preserving Section 2's separate authority over the equality and uniformity of occupation taxes.
The general repealer in Section 8.02 backs up the enumerated list with a functional test:
"Every provision of this constitution that authorizes, requires, limits, or governs the levy, assessment, appraisal, equalization, collection, or enforcement of a tax measured by the value or ownership of property, or that authorizes a tax measured by revenue, gross receipts, margin, profit, or business activity, is repealed to the extent of its conflict with Sections 1-e and 1-m through 1-x, Article VIII, of this constitution, effective on the Implementation Date."
Both the enumerated repeal and the general repeal are effective on the Implementation Date — not the earlier effective date on which the Legislature is authorized to begin writing implementing law — and both preserve whatever is necessary to finish collecting a tax lawfully assessed before that date, a wind-down mechanic covered in full in Part 12.
| Constitutional provision | HJR provision | Action | Reason |
|---|---|---|---|
| Art. VIII, Sec. 7-a | Sec. 2.01 | Re-keyed to sales and use tax | Motor fuel tax abolished; road/school dedication preserved |
| Art. VIII, Secs. 7-c, 7-d, 7-e | Sec. 2.02(a)-(c) | Re-keyed to Tier 1 sales and use tax | Motor vehicle, sporting goods, water fund dedications preserved |
| Art. VIII, Sec. 22 | Sec. 2.02(e), 2.03 | General conforming rule; budget cap extended | Avoids rewriting every dedication; aligns growth limits |
| Art. III, Sec. 49-r (new) | Sec. 3.01 | Transition Fund created | Finances transition off ad valorem taxation |
| Art. III, Sec. 49-g(r) | Sec. 3.02 | ESF redesignated; severance transfer ended | Oil/gas tax abolished; new capitalization substituted |
| Art. III, Sec. 49-j(e)-(f) | Sec. 3.03 | Bond Service Levy excluded from debt ratio | Preserves state bonding capacity |
| Art. III, Sec. 48-e, 48-f, 52, 52-a, 52d, 52k | Sec. 3.04 | Ad valorem authority ended; Tier 2/5 reclassification | Districts funded by sales and use tax |
| Art. VII, Sec. 1 | Sec. 4.01 | Efficient system redefined | Uniform-rate-plus-floor standard replaces equalization |
| Art. VII, Sec. 3, 3-b | Sec. 4.02–4.04 | Ad valorem ended; Tier 4/5 mechanism substituted | FSP and recapture repealed; college absorption path created |
| Art. VII, Sec. 5(h)-(i) | Sec. 4.05 | PSF guarantee preserved; charter co-guarantee added | Bond continuity for ISD and charter bonds |
| Art. XI, Sec. 4, 5, 7 | Sec. 5.01–5.03 | Ad valorem ended; Tier 3 classification | Cities and sea wall projects funded by sales and use tax |
| Art. IX, Sec. 4, 5, 8, 9, 11, 12, 13 | Sec. 6.01 | Ad valorem ended; Tier 5 classification | Hospital districts, airport authorities funded by sales and use tax |
| Art. XVI, Sec. 59 | Sec. 7.01 | Ad valorem ended; metered charges preserved | Conservation/reclamation districts funded by sales tax; fees are not taxes |
| Art. XVI, Secs. 61, 65; Art. III, Sec. 20 | Sec. 7.02 | Office references limited to existence period | Assessor-collector wound down under Sec. 9.03 |
| Art. VIII, 33 enumerated provisions | Sec. 8.01(a) | Repealed | Exemption/valuation/lien/cap rules govern no existing tax |
| Art. VII, Sec. 6b; Art. III, Sec. 49-g(b)-(e); Art. VIII, Sec. 2(b) (property portion) | Sec. 8.01(b)-(c) | Repealed | Superseded by conforming provisions above |
| All remaining ad valorem/business-measured tax provisions | Sec. 8.02 | General repeal | Catches provisions not individually enumerated |
Ambiguity note: the HJR's own drafting note under Section 8.01 flags that two separate Article VIII exemption sections are currently both designated "Section 1-n" in the published constitution, and instructs that the numbering be reconciled against the current constitution before filing. This piece does not attempt to resolve that numbering conflict — it is reproduced here as the HJR states it.
How and When It Takes Effect: The Ballot, the Calendar, and the Transition
Implements HJR Article 9 (temporary provisions governing the effective date, transition period, and wind-down of ad valorem administration) and Article 10 (submission of the amendment to the voters).
A constitutional amendment of this scope cannot flip on overnight. The HJR builds a fixed, dated calendar for moving from property tax to sales and use tax, backstops that calendar with a self-executing fallback in case the Legislature misses a deadline, and writes a separate wind-down schedule for closing out the appraisal and collection machinery the old system depended on. This part covers that calendar, the transition mechanics, the severability rules that protect the amendment if part of it is challenged in court, and the exact language voters will see on the ballot.
The Calendar: Three Dates That Matter
HJR Section 9.01 → Article VIII, Section 1-e and 1-m through 1-x sets three controlling dates.
January 1, 2028 — the amendment takes effect for legislative purposes. This is the date the amendment becomes operative for one specific purpose: authorizing and requiring the Legislature to write the general laws needed to carry it out. Nothing changes for taxpayers on this date — no tax is abolished and no rate takes effect yet.
"This amendment takes effect January 1, 2028, for the purpose of authorizing and requiring the Legislature to enact the general laws necessary to implement it."
January 1, 2029 — the Implementation Date. This is the date the entire system actually turns on. HJR Section 9.01(b) lists four things that happen simultaneously on that date: collection of the tiered sales and use tax begins; the prohibition on ad valorem taxation takes effect, so no taxing entity may levy, assess, or collect a property tax for any period beginning on or after that date; the state taxes abolished elsewhere in the amendment (motor fuel, oil and gas production, motor vehicle sales, insurance premiums, hotel occupancy, alcoholic beverages, tobacco, utility gross receipts, and coin-operated machines, among others) are abolished; and every existing local sales and use tax imposed under prior general law is absorbed into the rate of the entity that imposed it.
2028 — the final ad valorem tax year. HJR Section 9.01(c) fixes 2028 as the last tax year in which any government in Texas may levy and assess a property tax. Combined with the Implementation Date, this means the last property tax bills Texans receive will be for the 2028 tax year, due before the sales and use tax system takes over on January 1, 2029.
The Legislature's Deadline, and the Self-Executing Fallback
HJR Section 9.02(b) → Article VIII directs the Legislature to enact the implementing general laws during its regular session convening in 2027, in time to take effect by the Implementation Date. But the HJR does not leave the entire plan hostage to legislative inaction. It writes its own backstop directly into the amendment:
"If the Legislature fails to enact implementing legislation before the Implementation Date, the tier rates certified by the comptroller under Subsection (e) of this section take effect on that date by operation of this constitution, and Sections 1-e and 1-m through 1-x, Article VIII, of this constitution are self-executing to the extent necessary to give this amendment effect."
In other words, if the Legislature stalls, the amendment does not stall with it. The rates the Comptroller has already certified simply become law on the Implementation Date, and the core provisions of the amendment operate on their own force.
The Comptroller's 180-Day Certification
HJR Section 9.02(c) → Article VIII assigns the Comptroller a hard deadline: not later than the 180th day before the Implementation Date — July 5, 2028, on the calendar set by Section 9.01 — the Comptroller must certify and publish, for every taxing entity in the state, a defined set of figures:
- the entity's Final Year Baseline (its certified actual final-year combined tax revenue, the number the transition capture and assistance eligibility standards are measured against);
- the entity's Total Replacement Obligation;
- the entity's tier classification;
- the entity's initial I&S rate and initial M&O rate;
- the entity's Full Budget Funding Amount, Six-Month Minimum Balance, and One-Year Maximum Balance; and
- the initial rate for each tier.
This certification is what makes the self-executing fallback in Section 9.01(d) workable — every entity, and every citizen, can see in writing what rate and what baseline applies to their own jurisdiction well before the system goes live, whether or not the Legislature has separately acted.
Absorbing Existing Local Sales Taxes
Texas already has a patchwork of local sales taxes layered on top of the state rate — city sales taxes, transit authority taxes, and others, all governed by prior general law. HJR Section 9.01(b)(4) resolves the overlap directly: each of those existing local sales and use taxes is superseded by the amendment, and its rate is absorbed into the tier rate of the entity that imposed it, "so that no transaction is subject to both a superseded local sales tax and the tax established by this amendment." A city that previously levied its own local sales tax does not keep collecting that tax on top of its new Tier 3 rate — the old rate becomes part of the calculation behind the new one, not an addition to it.
The Transition Period and the Capture Years
HJR Section 9.02(d) → Article III, Section 49-r and Article VIII, Section 1-t and 1-u lay out a six-year Transition Period that begins on the Implementation Date, with a graduated schedule for how much of an entity's above-baseline surplus is captured into the Transition Fund rather than flowing through the ordinary waterfall:
| Fiscal year after Implementation Date | Capture rule | HJR citation |
|---|---|---|
| Year 1 | All collections above the entity's Final Year Baseline transferred to the Transition Fund at each quarterly distribution | Sec. 9.02(b) → Art. III, Sec. 49-r(b)(2)(A) |
| Year 2 | Capture capped at up to 50 percent of above-baseline surplus, as the Transition Board determines | Sec. 9.02(c) → Art. III, Sec. 49-r(b)(2)(B) |
| Year 3 onward | No collections transferred to the Transition Fund; full waterfall governs all surplus | Sec. 9.02(d) → Art. III, Sec. 49-r(b)(2)(C) |
The Citizen Dividend guarantee under Article VIII, Section 1-t(e) applies from the first fiscal period any taxing entity has a distributable surplus pool, including a period that falls inside the Transition Period itself, to the extent general law provides — the transition does not delay the dividend once a genuine surplus exists.
The same section restates the "no entity left behind" guarantee discussed elsewhere in this article: no taxing entity may be placed in financial exigency solely because of the transition, provided it has timely applied for assistance and is cooperating with lawful restructuring recommendations. But that guarantee comes with a strict eligibility test — the Assistance Eligibility Standard:
"An entity is assisted only if its voters have approved a rate at the Constitutional Cap Rate applicable to the entity and its collections at that rate remain insufficient to produce its Final Year Baseline. An entity whose voters have rejected a proposed rate increase shall reduce its budget under Section 1-n(e) of that article and is ineligible for assistance."
That same standard, per HJR Section 9.02(d)(7), governs assistance requests made after the Transition Period ends, once responsibility shifts to the permanent Transition Monitoring Division inside the Comptroller's office. Section 9.02(h) also confirms that the Foundation School Program and the excess local revenue recapture ("Robin Hood") system have no further force or effect on and after the Implementation Date, while a recapture payment tied to a tax year that ended before that date remains due under prior law.
Winding Down Ad Valorem Administration
Abolishing the property tax does not erase taxes that were already owed. HJR Section 9.02(e) → Article VIII sets the rules for closing out the old system without disturbing anyone's existing legal obligations.
What survives the Implementation Date. Section 9.03(a) keeps any ad valorem tax lawfully assessed for a tax year ending before the Implementation Date fully due, collectible, and enforceable — with penalty, interest, and the underlying tax lien all remaining valid until the tax is paid or otherwise discharged.
Appraisal district dissolution within three years. Section 9.03(b) keeps each appraisal district, appraisal review board, and county assessor-collector alive after the Implementation Date, but only for the limited purpose of finishing collection on pre-existing taxes and resolving pending protests, appeals, and suits — and only "not to exceed three years." Every appraisal district is abolished on the third anniversary of the Implementation Date, and the Legislature must provide by general law for what happens to its records, assets, liabilities, and employees.
Delinquency and lien-release rules — subsections (c) through (e). Section 9.03(c) closes the door on any new property tax assessment: none may be levied for any period beginning on or after the Implementation Date, though a tax already assessed for the final ad valorem tax year (2028) remains collectible under subsection (a) until it is paid or resolved. Section 9.03(d) then makes a point the bond guarantee depends on: bond debt service payments do not depend on, and cannot be conditioned on, collecting any delinquent property tax — debt service is funded from the entity's Bond Service Levy, backed by the I&S Reserve Fund, the shortfall cascade, and the state guarantee, and "no bondholder interest is impaired by the abatement or discharge of a delinquent ad valorem tax." That separation is what allows Section 9.03(e) to give the Legislature real flexibility on old debts — it may provide by general law for the abatement, discharge, compromise, or continued collection of delinquent property taxes, penalties, and interest, and for releasing the tax liens that secure them, including liens on residence homesteads. A discharge under this provision does not entitle anyone to a refund of a property tax already paid.
Severability — and the One Deliberate Exception
HJR Section 9.01(e) → Article VIII sets the standard severability rule: if any part of the amendment is held invalid, the rest survives wherever it can operate without the invalid part. But the HJR carves out one deliberate exception, tying two specific provisions together so neither can be enforced without the other:
"The abolition of ad valorem taxation effected by Section 1-e and the state guarantee of outstanding bond obligations established by Section 1-o are not severable from one another; if the guarantee is held invalid, the abolition does not take effect until the Legislature has provided an equivalent guarantee."
This is a direct answer to the bondholder's core concern raised earlier in this article: the property tax cannot legally disappear unless the bond guarantee that replaces its revenue-backing role survives with it, or an equivalent guarantee is enacted in its place. Section 9.04(c) adds that, to the extent of any conflict with any other provision of the constitution, this amendment controls, and Section 9.05 sunsets the rest of Article 9's temporary provisions on the sixth anniversary of the Implementation Date — except that Sections 9.01, 9.03, and 9.04 themselves do not expire, and no expiration affects a right or duty already fixed before it occurs.
The Ballot Proposition
HJR Section 10.02 sets the amendment for a statewide vote on November 2, 2027, and specifies the exact ballot language voters will see, printed to permit voting for or against the proposition:
"The constitutional amendment known as the Texas Property Tax Replacement Plan: abolishing all property taxes and the franchise tax in Texas, abolishing the state and local taxes on fuel, vehicles, insurance, hotels, beverages, tobacco, and utilities, and replacing all of them with a single sales and use tax capped at six percent; requiring voter approval before any government in Texas may raise its rate, impose any new tax, or borrow money; guaranteeing every outstanding government bond; requiring reserve, infrastructure, and first responder funds; and returning surplus collections to citizens."
The Explanatory Statement
HJR Section 10.01 requires a separate explanatory statement to accompany the ballot proposition under general law. Where the ballot language is necessarily short, the explanatory statement fills in the detail voters need: it makes clear the amendment abolishes every property tax at every level of government and prohibits its return; abolishes the franchise tax and every tax measured by revenue, gross receipts, margin, profit, or business activity; abolishes the specific list of state and local taxes named in the ballot language as "duplicative second sales taxes"; and replaces all of it with a single sales and use tax applied uniformly, without exemption except for whatever cost-of-living exemptions the Legislature enacts under the Cost of Living Standard.
The explanatory statement goes on to describe the rate cap and local rate-setting structure, the universal voter-approval requirement for rate increases, new taxes, and borrowing, and the binding consequence of a rejected rate increase — a government whose voters say no must cut its budget and cannot be made whole by the state. It describes the bond guarantee and the citizens-first purchase right, the required reserve, infrastructure, and first-responder funds, the end of the Foundation School Program and recapture in favor of per-district funding with a guaranteed floor, the return of surplus collections to citizens as a dividend, the temporary transition board and fund plus the permanent successor inside the Comptroller's office, and the standing every Texas citizen has to enforce these protections in court with attorney's fees against a violating government.
Why This Changes Everything for Texas Families and Businesses
The political accountability mechanisms, the incentive structure, and what citizens will see and feel under the TPTRP.
The Political Accountability Mechanism
The TPTRP's design does not rely on the goodwill of elected officials. It creates structural incentives that make responsible fiscal management the politically rewarding path and rate increases the politically costly one.
- The Citizen Dividend creates a direct political feedback loop. When a governing body manages its budget efficiently, the Citizen Dividend grows. Every citizen receives a Citizen Distribution Statement showing exactly what their government collected, spent, and how it voted at each waterfall level. A governing body that builds infrastructure, funds first responders, and returns a meaningful dividend will earn citizen trust and re-election. A governing body that grows its budget year over year while returning little will have a clear public record of those choices — visible to every voter.
- The Unified Rate Reduction Rule makes surplus accumulation politically untenable once the Stabilization Fund is funded. Because the financial officer's recommendation is on the public record, citizens will know whether their officials were advised to reduce the rate and voted against it.
- The Cumulative Budget Growth Cap prevents slow-creep budget expansion. If a jurisdiction's economy grows 23% over a decade, the governing body's budget may only have grown 11.5% — the other 11.5% belongs to citizens through rate reduction, not to government through expansion.
- The 10-year rolling rate history published for every entity by the Comptroller allows citizens, journalists, and advocacy organizations to build and publish fiscal scorecards comparing how well governing bodies across Texas have managed their rates, creating Texas-wide competitive accountability.
- Voter approval for any increase puts citizens in control of the ceiling. The political cost of calling a rate increase election and winning a majority creates a powerful incentive to manage costs within existing rates.
- Citizens First bond sale rights turn government debt into a wealth-building opportunity for the citizens who back it, creating a direct financial interest in their government's fiscal discipline and credit quality.
- Citizen enforcement standing gives every Texan a direct legal remedy with fee-shifting, removing the financial barrier to enforcement and ensuring violations can't be buried in procedural delay.
What Citizens Will See and Feel
Under the current property tax system, most Texans receive a bill once a year, have limited visibility into how it was calculated, and have little practical recourse short of an appraisal protest. The TPTRP replaces that with:
- A visible, stable rate that shows up on every purchase
- An automatically declining I&S component as bonds are paid off — guaranteed, periodic rate reductions requiring no action from anyone
- A mandatory rate reduction law that kicks in when efficiency produces sustained surplus and required reserves are in place
- A constitutional Citizen Dividend returned to them when their government has managed well — characterized as a tax refund, not a government benefit, protected from federal income treatment
- The first right to purchase the bonds their taxes back, earning tax-exempt interest on their own community's debt
- A plain-language Citizen Distribution Statement and Citizens Budget Summary every fiscal period explaining exactly what their money funded and how officials voted
- A direct democratic vote before any level of government can take more
- A court remedy — available to any citizen — if any of these protections are violated
| # | Trigger | Mechanism | Who Acts |
|---|---|---|---|
| 1 | Annual collections begin | I&S covers bond debt service + minimum 5% I&S buffer → I&S Reserve Fund | Automatic — Comptroller certified |
| 2 | I&S met | M&O rate funds operations + minimum 5% M&O buffer | Entity governing body (CCR cap applies) |
| 3 | Buffer > 10% and 6-month Stabilization Fund minimum met | Public surplus notice required within 60 days; prerequisite: 6-month Stabilization Fund minimum must be met | Entity — required by statute |
| 4 | ANR > 1.10 for 2 consecutive years and 6-month Stabilization Fund minimum met | Unified Rate Reduction Rule: rate reduced to ANR≤ 1.05; Comptroller certifies if entity fails to act within 60 days | Entity required by law; Comptroller enforces |
| 5 (Yrs 1–2) | Transition Period | Comptroller splits total surplus at collection: 50% → Transition Fund; 50% → entity waterfall pool | Comptroller + Transition Board |
| 6 | Fiscal year end | Level 1: surplus split 50/50 → Stabilization Fund (required to 6-month min; optional to 1-year max) + Level 2 | Governing body; CFO advises on record |
| 7 | Natural/declared disaster | Tiered cascade: City/ISD → County → State → Insurance policies take effect | Automatic upon declaration |
| 8 | Level 1 complete | Level 2: 50/50 → I&S Reserve Fund (purpose-locked) + Level 3 | Governing body; CFO advises on record |
| 9 | Level 2 complete | Level 3: 5% guaranteed → Dividend Fund; 45% → Infrastructure Fund; 45% → First Responder Fund (or SD redirect); unused → Dividend Fund | Governing body; CFO + dept. heads advise on record |
| 10 | Level 3 complete | Level 4: Citizen Dividend distributed equally to all qualifying adult citizens; minor shares to custodian accounts; Citizen Distribution Statement sent to all citizens | Comptroller-coordinated distribution |
| 11 | Bond matures or defeased | I&S rate automatically reduces; new lower rate certified | Automatic — Comptroller certified |
| 12 | New voter-approved bond election certified | Citizens First 30-day offering period opens; 25% minimum reserved for citizen purchase at $100 minimum denomination | Entity + Comptroller citizen bond portal |
| 12a | Rate increase proposed | Voter-approved election required; specific rate + budget plan on ballot; may not exceed tier CCR; functional tax increases and additional tax forms require same approval | Citizens — election required |
| 12b (Yr 1) | Year-1 M&O shortfall detected after first 2 quarterly distributions | Entity may submit M&O rate increase election immediately; if CCR headroom insufficient, Transition Fund backstop applies; if voters reject, budget reduction protocol activates | Entity governing body → Voters; Transition Board notified within 10 days |
| 13 | Rate decrease proposed | Governing body votes to reduce; cannot go below M&O floor + I&S floor; anti-laundering rule applies to cumulative cap baseline | Governing body — subject to rate floor |
| 14 | Annual public reporting | All rates, 10-year history, fund balances, surplus notices, budget, waterfall distributions, CFO advisements, Citizens Budget Summary, and Annual Fiscal Reduction Plan published | Entity — required within defined deadlines |
| 15 | Voter rejection of rate increase | Entity has 1 year to execute Fiscal Reduction Plan; due process before state receivership; reduction proceeds in constitutional order | Entity (1 yr); State-appointed managers if non-compliant |
| 16 | Stabilization Fund reaches 50% floor (no declaration) | Fiscal discipline framework activates; same 1-year reduction timeline; due process; state receivership; funding assistance: Transition Fund, ESF loan, or dissolution/absorption | Comptroller + State-appointed managers |
| 17 | Any constitutional violation | Citizen enforcement action in district court; expedited hearing; attorney's fees awarded to prevailing citizen; Citizens First bond placement violation is voidable by any citizen | Any Texas citizen in the jurisdiction |
What Is Genuinely Original About This Plan
For the historical record, the legislative findings section, and constituent communication. The following features of the TPTRP have no direct precedent in any other state or jurisdiction:
- Constitutional prohibition on property taxes — no state has ever made ad valorem property taxes unconstitutional. Texas would be the first.
- Multi-tier constitutional Citizen Dividend — the equal per-capita dividend applies at every level of government simultaneously. The Alaska PFD operates only at the state level.
- Automatic I&S rate reduction on bond retirement — guaranteed, law-automatic, requiring no governing body action.
- Unified Rate Reduction Rule (Actual Need Ratio) with Stabilization Fund Prerequisite — a constitutional enforcement mechanism that turns fiscal efficiency into a required rate benefit once required reserves are in place, with Comptroller backstop authority.
- Cumulative Budget Growth Cap measured from the last rate-setting event — equal to half of cumulative economic revenue growth, with an anti-laundering rule. No state applies a long-window cumulative cap of this design.
- Anti-circumvention definition of "tax increase" — constitutionally closes the loopholes that have eroded voter-approval protections in other states.
- Cost of Living Standard — a constitutional anti-corruption lock on exemptions — no state has constitutionally prohibited commercial and business-class tax exemptions by a single governing standard. Texas's current 200+ exemption system is permanently replaced.
- Citizen enforcement standing with fee-shifting — every protection enforceable by any Texas citizen directly in court, with attorney's fees awarded to prevailing citizens.
- Tiered disaster cascade funded by multi-entity Stabilization Funds — designed to reduce insurance risk and lower property insurance premiums for Texas homeowners.
- Four-level constitutional surplus waterfall — Stabilization → Debt Acceleration → Infrastructure/First Responder → Citizen Dividend, all constitutionally mandated steps rather than legislatively discretionary choices.
- Financial officer advisement on the public record at every waterfall decision point — an automatic, searchable accountability trail for every surplus distribution choice.
- Constitutional fiscal discipline and receivership framework with due process and scope-limited managers — no other state has constitutionalized this level of fiscal accountability with these citizen safeguards.
- Constitutional voter-approval requirement for all additional tax forms at every level of government including the state — no other state has constitutionally prohibited new tax types by any entity including the state itself without both legislative authorization and direct voter approval.
- Year-1 Shortfall Protocol — mid-cycle democratic remedy during the transition period — entities that project genuine collection shortfalls within the first six months may immediately seek voter approval for a targeted M&O rate adjustment.
- Citizens First Bond Sale Requirement with 25% minimum citizen reserve and $100 minimum denomination — no state constitutionally guarantees citizens the first right of purchase on their government's bond issuances, converting government debt into a household wealth-building instrument at the community level.
- Binding voter rejection with state-assistance disqualification — a government whose voters decline a rate increase must reduce its budget, and no state fund, board, or officer may "supply, offset, advance, or otherwise make good the revenue the voters declined to authorize." No other state makes the ballot result financially final.
- Aggregate tier cap with administrative apportionment among overlapping districts — one-half of one percent shared by every special district serving an address, apportioned against certified obligations, creating continuous consolidation pressure on more than 3,000 districts.
- Automatic bond-rate step-down on sustained over-collection — when Interest and Sinking collections exceed certified debt service by more than 10% for two consecutive periods, the rate falls to the 5% floor without any vote, so economic growth reduces the tax rather than accumulating in a fund.
- Constitutional redefinition of educational efficiency without redistribution — equal access to a uniform maximum rate plus a guaranteed funding floor, with recapture foreclosed as a legislative or judicial remedy.
- Government as Citizen-Owned Enterprise — Seven Performance Criteria codified in legislative findings — the formal declaration that every taxing entity is a citizen-owned enterprise accountable to seven performance criteria, with the Citizen Dividend as the measurable performance metric, is without precedent in American tax law.
References
Sources are organized by the sections of this article they principally inform. Citations follow APA 7th Edition format. Every source is a primary legal or governmental original.
The Amendment Itself — All Parts
Campbell, W. (2027). Texas Property Tax Replacement Plan: House Joint Resolution proposing a constitutional amendment. 90th Texas Legislature, Regular Session. https://www.willcampbellfortexas.com/tptrp-amendment
The full text of the joint resolution. Every citation in this article links directly to the corresponding section of that page. Formatted per the Texas Legislative Council Drafting Manual.
Constitutional Text — Parts 1 through 12
Texas Legislative Council. (2025). The Texas Constitution (as amended through the November 4, 2025 constitutional amendment election). https://statutes.capitol.texas.gov/Docs/CN/htm/CN.0.htm
The operative text of every article and section this amendment amends, adds, or repeals — Articles III, VII, VIII, IX, XI, and XVI. Used to verify each existing designation and the scope of the repealer.
Texas Legislative Council. (2025). Texas Legislative Council Drafting Manual, 89th Legislature. https://www.tlc.texas.gov/docs/legref/draftingmanual-89.pdf
Governs the form of the joint resolution: caption, resolving clause, amendatory section structure, repealers, temporary provisions, and the submission clause.
Reach, Sourcing, and Remote Sellers — Part 1
South Dakota v. Wayfair, Inc., 585 U.S. 162 (2018). Supreme Court of the United States, slip opinion No. 17-494. https://www.supremecourt.gov/opinions/17pdf/17-494_j4el.pdf
Establishes that a state may require a remote seller to collect and remit sales tax based on economic presence alone, without physical presence. The constitutional foundation for the economic nexus thresholds written into Section 1-q.
School Finance and the Efficient System — Part 6B
Edgewood Independent School District v. Kirby, 777 S.W.2d 391 (Tex. 1989) (No. C-8353, decided October 2, 1989). Indexed in Texas Legislative Reference Library, School finance litigation archive. https://lrl.texas.gov/collections/schoolFinance/lrlhome.cfm
The decision defining an efficient system under Article VII, Section 1 in terms of substantially equal access to similar revenue at similar tax effort. The standard the amendment addresses directly by redefining efficiency in the constitutional text. The Legislative Reference Library archive is a Texas legislative agency index of every school finance opinion and the legislation enacted in response to each.
Texas Education Agency. (2025). Foundation School Program payment systems and the school finance system. https://tea.texas.gov/finance-and-grants/state-funding
The entitlement formula and recapture mechanism the amendment supersedes, including the allotment structure of Education Code Chapter 48 and the excess local revenue provisions of Chapter 49.
Reserve Funds and State Fiscal Structure — Parts 5, 7, and 8
Texas Comptroller of Public Accounts. (2025). Economic Stabilization Fund history table. Fiscal Management Division. https://fmx.cpa.texas.gov/fmx/legis/esf/index.php
The existing state reserve, its severance-tax capitalization mechanism under Article III, Section 49-g, and the balance history relevant to the six-month minimum and one-year maximum standard the amendment applies to every taxing entity.